Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

Kingsbridge and Salcombe Water Board Bill [Lords] (King's Consent signified),

Bill read the Third time, and passed, with Amendments.

Taf Fechan Water Supply Bill [Lords],

Warrington Corporation Bill [Lords],

Read the Third time, and passed, with Amendments.

Hastings Extension Bill [Lords],

As amended, considered; Amendments made; Bill to be read the Third time.

Oral Answers to Questions — HOSIERY AND ARTIFICIAL-SILK WORKERS (WAGES).

Mr. Lyons: asked the Minister of Labour the average weekly wage in terms of British currency paid, as at the latest convenient date this year, to male hosiery and artificial-silk workers, respectively, in Japan; the amount of maintenance and other deductions therefrom; and the comparable wages in this country at a similar date?

The Minister of Labour (Mr. Ernest Brown): As the reply is long, and includes a number of figures, I will, if I may, circulate it in the OFFICIAL REPORT.

Mr. Lyons: May I ask the right hon. Gentleman whether, in view of the great disparity between these figures, the facts which he is going to circulate will be brought to the notice of the Import Duties Advisory Committees?

Mr. Brown: The hon. and learned Member had better wait and see the statement. I have given all the information I can.

Mr. T. Williams: Will the right hon. Gentleman give similar figures in respect of Indian workers?

Mr. Brown: If a question is addressed to me, I will try to get the information.

Following is the reply:

According to statistics issued by the Japanese Ministry of Commerce and Industry, based on returns obtained from Chambers of Commerce in various districts, the average daily earnings, at March, 1937, of male hosiery workers in Japan were 1.28 yen, and those of male artificial-silk yarn spinners were 1.25 yen. These earnings, at the current rate of exchange, are equivalent to about 1s. 6d. and 1s. 5½d. a day, respectively. Corresponding figures are not given for other classes of male workers employed in the artificial-silk industry. The statistics are stated to relate to workers of average skill in selected undertakings, excluding (a) apprentices and learners, and (b) persons employed under special conditions and in receipt of exceptionally high or exceptionally low wages. They are further stated to be inclusive of overtime and night-work payments, bonuses for quality of work or output, and allowances in respect of food or the value of food where this is provided; but not to include seasonal gifts, payments made during unemployment or sickness, discharge and retirement allowances, clothing, lodging, etc., allowances, or other contributions towards the living expenses of the workers, apart from food and food allowances. Statistics relating to average earnings in the hosiery and artificial-silk industries are also published by the Bank of Japan, on the basis of returns obtained from employers. In February, 1937, the latest date for which figures are at present in my possession, the average daily earnings, as shown by these statistics, for male operatives, excluding apprentices and learners, were 1.441 yen in the hosiery industry and 1.313 yen in the artificial-silk industry (equivalent, at the current rates of exchange, to about 1s. 8d. and 1s. 6½d. respectively). These figures are stated to include all allowances, other than yearly or half-yearly bonuses. I am not in possession of information respecting average weekly earnings in Japan.

For Great Britain the latest official inquiry into average earnings in these industries relates to the week ended 12th


October, 1935. The average weekly earnings of all classes of male workers (skilled and unskilled) in Great Britain and Northern Ireland shown by the results of that inquiry, were as follow:



Men (21 years and over).
Youths and Boys.



s.
d.
s.
d.


Hoisery manufacture
72
3
26
1


Artificial-silk yarn manufacture
67
3
39
11


Silk throwing, spinning and weaving, and artificial-silk-weaving
66
10
30
8

Since October, 1935, there has been increases in the rates of wages of some of the workpeople in these industries.

Oral Answers to Questions — UNEMPLOYMENT.

SITE COMPANIES.

Mr. James Griffiths: asked the Minister of Labour how many areas have been certified under the provisions of the Special Areas (Amendment) Act, 1937; how many site companies have been formed; and what progress has been made in regard to them?

Mr. E. Brown: It is an essential condition of assistance to an area certified under Section 5 of this Act that a site company should be formed. I understand that the question of establishing a site company is under consideration in several areas, but in no case has the matter yet reached a stage at which an application that the area should be certified can usefully be considered.

Mr. Griffiths: Can the right hon. Gentleman say whether, in view of the experience of the provisions of this Act, there is any possibility of certifying these areas?

Mr. Brown: I can add nothing to what I have said, except that I know that in several areas active consideration is now being given to the matter.

Mr. Griffiths: And nothing has been done.

SOUTH-WEST DURHAM.

Mr. W. Joseph Stewart: asked the Minister of Labour whether he is aware that the insured unemployment figures for Bishop Auckland are 36.2, Shildon 35.2, and Crook 26.9, all in South-West Durham; and what steps are being taken by the South-West Durham Improvement Association to deal with this situation?

Mr. E. Brown: The South-West Durham Improvement Association has not yet been registered but the board of the association has, I understand, already met and is giving consideration to its programme. I can assure the hon. Member that no opportunity will be neglected by the association, or by any other agency working in collaboration with the Commissioner for the Special Areas, for any practicable steps towards the reduction of the unemployment figures to which he refers.

Mr. Stewart: Is it the intention of the right hon. Gentleman to keep in communication with the South-West Durham Improvement Association, with a view to introducing works schemes in that particular area in order to absorb those who are unemployed?

Mr. Brown: I am in very close and most constant touch with the association, and I am watching its development with very great interest.

Mr. Stewart: asked the Minister of Labour whether any arrangement has yet been come to between the Durham County Council and the Commissioner for the Special Areas for the prevention of water flowing into the colliery working at Evenwood Colliery from the River Gaunless; and, if so, what these arrangements are?

Mr. Brown: I understand that the Commissioner for the Special Areas (England and Wales) has received a report from the Durham County Council on this subject, in which the Council stated that in their opinion it was not possible to give any estimate of the cost of remedial works or to guarantee that these would be effective. In these circumstances the Commissioner has indicated his willingness to make a grant to the South-West Durham Reconstruction and Development Board of the cost of a detailed survey of the problem, including the preparation of a schedule of remedial works. The report when completed will be available for consideration by the various interests concerned.

SUPPLEMENTARY ALLOWANCES.

Mr. J. Griffiths: asked the Minister of Labour whether any instructions have recently been issued by the Unemployment Assistance Board to their officers advising them to curtail the amount of


supplementary allowances being given and generally to tighten up the administration by applying the scales more rigorously?

Mr. E. Brown: I assume the hon. Member refers to the supplementary allowances, payable in certain circumstances under the Standstill Act, 1935. The board are now proceeding to make gradual and progressive adjustments in such allowances under the powers conferred in the Regulations of 1936, and in accordance with specific recommendations of local advisory committees. These recommendations have been made in the light of a memorandum addressed by the board to committees (A.C.G.7) copies of which are available in the Library of the House. I should point out that supplementary allowances are always in excess of the scale, and there is therefore no question of applying the scales more rigorously.

Mr. Griffiths: Can the right hon. Gentleman say whether the advisory committees, in recommending that there should be no increases at all, are permitted to take cognisance of the increase in the cost of living since the original allowances were fixed last summer?

Mr. Brown: My advice is that they take all the facts into consideration.

Mr. Griffiths: If the local advisory committee, having regard to the increased cost of living, advise that an increase be made, will the right hon. Gentleman agree to give effect to such a recommendation?

Mr. Brown: If the hon. Member can give me the name of any particular advisory committee that is concerned and will put down a question, I will have inquiries made as to whether that has been done.

Mr. George Griffiths: Is it not the fact that in Yorkshire at the present time, when a lad receives an increase of 1½d. per day because of his age, they take it off his father if he is on public assistance?

Hon. Members: No.

Mr. Griffiths: I say yes.

STATISTICS.

Mr. Day: asked the Minister of Labour the number of persons on the registers of the Employment Exchanges

in Great Britain as at the last convenient date?

Mr. E. Brown: At 24th May 1937, the latest date for which figures are available, there were 1,451,330 unemployed persons on the registers of Employment Exchanges in Great Britain.

Mr. Day: In view of the fact that these figures are considerably higher than they were in 1929, will the Minister say what steps the Government propose to take to reduce them?

Mr. Brown: The hon. Member has taken that date rather opportunely. If he had taken 1931, it would have been different.

LIVERPOOL.

Mr. Kirby: asked the Minister of Labour to what extent employers of labour use the Liverpool Employment Exchanges when filling vacancies for workpeople; and will he take steps to encourage employers to make greater use of the facilities available at such Exchanges?

Mr. E. Brown: The extent to which employers of labour use the Employment Exchanges is indicated by the fact that over 78,000 vacancies were filled through the Employment Exchanges in the Liverpool area during 1936. All possible steps are taken to encourage the use of the Employment Exchanges for the engagement of workpeople, and the attention of employers is drawn to the facilities available by means of personal visits by the Exchange staff, and forms of publicity, including the display of posters, issue of circular letters and leaflets and Press articles.

Mr. Kirby: Can the Minister give the figures as between the ordinary commercial and industrial employers, and the Corporation of Liverpool?

Mr. Brown: If the hon. Member will put down a question, I will see what I can do to obtain the information for him.

Mr. Kirby: asked the Minister of Labour what steps he has taken or contemplates taking to reduce the high percentage of unemployment in Liverpool?

Mr. Brown: I have nothing to add at present to the answer which I gave to the hon. Member on 3rd June.

Mr. Kirby: Does the Minister appreciate the very heavy volume of unemployment in Liverpool to-day, and is he ever going to consider the provision of work rather than the provision of benefits and allowances?

Mr. Brown: I appreciate the facts there.

TRADING ESTATE, TREFOREST.

Mr. George Hall: asked the Minister of Labour the estimated cost of the trading estate at Treforest, South Wales, with the number of workpeople employed in the work of laying out the estate; and when it is expected to complete the work?

Mr. E. Brown: The estimated cost of the scheme of development of the trading estate at Treforest authorised by the Commissioner for Special Areas is £800,000. The number of workpeople employed in laying out the estate is approximately 350. The date of the completion of this scheme, which covers only a part of the estate, will depend on the demand for factories.

Mr. Hall: Is the right hon. Gentleman aware that there is a great deal of dissatisfaction in South Wales at the expenditure of this huge sum of money, which it is felt could be very much better used for a more useful purpose in those centres where there is heavy unemployment?

Mr. Brown: I believe that the trading estate has been generally welcomed in South Wales. If the hon. Member has any evidence to the contrary, I shall be very glad to receive it from him.

JUNIOR INSTRUCTION CENTRES (MEALS).

Mr. G. Hall: asked the Minister of Labour whether he can now make a statement on the report of the National Advisory Council for Juvenile Employment for England and Wales regarding the provision of meals for juveniles in attendance at junior instruction centres?

Mr. E. Brown: I am fully alive to the importance of this question which is receiving my attention, and I hope to be able to announce a decision shortly.

LOCATION OF INDUSTRIES (DURHAM).

Mr. Leslie: asked the Minister of Labour whether location of industries in the North of England is to be confined

to the Team Valley trading estate, while derelict villages in the county of Durham are to remain neglected?

Mr. E. Brown: No, Sir.

Mr. Leslie: Is the right hon. Gentleman aware that these derelict villages offer excellent sites and transport facilities second to none, and is nothing to be done for them?

Mr. Brown: The hon. Member has asked a question which I have answered. It is not the intention of the Commissioner to confine location to the estate. The Act was passed in order that he might have discretion in the amount of relief he gave to help the areas referred to.

Mr. Leslie: When is something to be done?

WEST HAM.

Mr. Thorne: asked the Minister of Labour for each year from 1934 to 1936, and for the nearest available date, the average number of unemployed persons in the borough of West Ham, showing those in receipt of unemployment benefit and public assistance, respectively, in each of the said years?

Mr. E. Brown: As the reply includes a tabular statement, I will, if I may, circulate it in the OFFICIAL REPORT.

Following is the reply:

An analysis on these lines is available only in respect of Employment Exchange Areas. The following Table gives, for Canning Town and Stratford Employment Exchanges and Juvenile Employment Bureaux, the average numbers of (1) unemployed persons on the registers, (2) claims admitted for insurance benefit, and (3) applications authorised for transitional payments or unemployment allowances, in each of the years 1934 to 1936:


——
Average number of unemployed persons on registers.
Average number of claims admitted for insurance benefit.
Average number of applications authorised for transitional payments or unemployment allowances.


1934
…
15,992
8,428
3,547


1935
…
14,683
8,407
3,008


1936
…
11,903
6,929
2,373

The corresponding figures for 24th May, 1937, the latest date for which figures are available, were:




Number on register
10,824


Claims admitted for insurance benefit
6,861


Applications authorised for unemployment allowances
2,161

Comparison of the figures for 24th May, 1937, with those for the years given in the Table is affected by the extension of the Unemployment Assistance Scheme as from the second appointed day, 1st April, 1937.

Questions as to the numbers of persons in receipt of public assistance should be addressed to my right hon. Friend the Minister of Health.

Oral Answers to Questions — WAGES.

Mr. Lyons: asked the Minister of Labour the approximate upswing of wages for the year ended 31st May, 1937?

Mr. E. Brown: In those industries for which statistics are regularly compiled, the changes in rates of wages reported to my Department during the year ending 31st May, 1937, are estimated to have resulted in a net increase of nearly £600,000 a week in the full-time weekly rates of wages of about 4,250,000 work-people, and in a net decrease of about £1,200 a week in the weekly full-time rates of wages of about 25,000 work-people. These statistics are exclusive of changes in the rates of wages of agricultural labourers, domestic servants, shop assistants, clerks and Government employés, and they relate in the main to changes collectively arranged between organised groups of employers and work-people. It is estimated that in the industries for which information is available, the average level of full-time weekly rates of wages rose by nearly 3½ per cent. during this period.

Mr. Lyons: Can my right hon. Friend say whether these figures constitute a record upswing of wages for the whole time the figures have been kept by the Department under any Government?

Mr. Brown: I should like to verify that.

Mr. Paling: In view of the fact that wages have increased by only 3½ per cent., and the cost of living has increased by over 10 per cent., will it not take a long time to make up the leeway?

Mr. Brown: I would point out to the hon. Member that 10 per cent. is an incorrect figure.

Mr. Lawson: Is not that good work for trade unions?

Mr. Brown: It is certainly very good work for the employers and trade unions, and for the Government, which made the atmosphere possible.

Oral Answers to Questions — FORTY-HOUR WEEK CONVENTION (TEXTILE INDUSTRY).

Sir Nicholas Grattan-Doyle: asked the Minister of Labour whether it is proposed to take any action towards ratifying the convention adopted by the International Labour Office applying the principle of a 40-hour week to the textile industry; and what textile industry there is in the countries whose delegates supported the proposal?

Mr. E. Brown: In accordance with the obligation placed upon members of the International Labour Organisation under Article 405 of the Treaty of Versailles, the Government will consider the question of the action to be taken in respect of the Draft Convention, and the usual procedure will be followed of laying before Parliament a White Paper stating the action which it is proposed to take. With regard to the second part of the question, I am circulating in the OFFICIAL REPORT a statement of the final vote on the Draft Convention in which a list of the countries whose delegates supported the proposal is given. Having regard to the number of industries covered by the Draft Convention, I am afraid that it is difficult within the limits of this answer to include a statement of the extent of textile manufacture in these countries.

Mr. Paling: Can the right hon. Gentleman say whether the employers' representatives voted against this Convention because they were afraid of competition from low-paid countries?

Mr. Brown: It is not for me to draw any conclusion as to the vote that the representatives gave. They gave their own reasons before the conference, and the hon. Member will be able to read it in the report when it is available.

Mr. Paling: Did not the British Government give it as one of their reasons that they were afraid of competition from the low-paid countries?

Mr. Brown: The hon. Member knows quite well that that is a reflection that no British Government representative has made.

Mr. H. G. Williams: Has the right hon. Gentleman's attention been drawn to the fact that the European country which has introduced the 40-hour week is in a mess?

Mr. Mander: Did not three Governments of the Commonwealth nations vote for the Convention?

Mr. Brown: If the hon. Member will read the list he will see.

Mr. Mander: Is not that so?

Following is the list:


FINAL VOTE ON TEXTILE DRAFT CONVENTION.


For.


Albania.
Finland.


Argentine Republic.
France.



Latvia


Australia.
Luxemburg.


Belgium.
Mexico.


Bolivia.
Norway.


Brazil.
New Zealand.


Canada.
Panama.


Chile.
Peru.


Cuba.
Russia.


Czechoslovakia.
Spain.


Denmark.
Turkey.


Dominican Republic.
United States.



Uruguay.


Ecuador.
Yugoslavia




Against.


Great Britain.
Japan.


Estonia.
Holland.


India.
Switzerland.




Abstained.


Afghanistan.
Irish Free State.


Austria.
Lithuania.


Bulgaria.
Poland.


China.
Portugal.


Colombia.
Rumania.


Egypt.
Siam.


Greece.
Sweden.


Hungary.
South Africa.


Iraq.
Venezuela.


Iran.

Oral Answers to Questions — EMPLOYMENT EXCHANGES (BRANCH MANAGERS' HOLIDAYS).

Sir N. Grattan-Doyle: asked the Minister of Labour whether he is aware that branch managers of employment exchanges have no holidays with pay and are required, if they take a holiday, to provide a deputy in their absence or to pay 10s. a day for the loan of an officer from the Ministry of Labour; and whether, with a view to Government employment being an example to private employers, he will direct that branch managers shall in future have appropriate leave with pay?

Mr. E. Brown: Branch managers are not salaried employès in the ordinary sense. Their payment covers the provision of premises and any clerical assistance necessary for the branch office. This payment is not affected by the absence of the manager for particular periods, except to the extent that the deduction mentioned in the question is made if clerical assistance has to be provided during his absence. The association representing the branch managers gave evidence recently before the Holidays with Pay Committee, and I propose to await the report of that committee.

Oral Answers to Questions — FACTORIES (ELECTRICAL INSPECTORS).

Mr. Kelly: asked the Secretary of State for the Home Department whether he is aware that at a recent inquest on a man who was killed whilst testing a switchboard it was revealed that, there were only five electrical factory inspectors for the whole country; and whether it is proposed to augment this number?

The Secretary of State for the Home Department (Sir Samuel Hoare): No, Sir. There are nine electrical inspectors working under His Majesty's Senior Electrical Inspector of Factories, and the inspection of electrical apparatus in factories also forms part of the duties of the general staff of factory inspectors. The strength of the inspectorate will be reviewed in the light of the provisions of the Factories Bill as finally settled.

Mr. Kelly: In view of the evidence given at the inquest, and in view of the great demands there are for inspection in this respect, will the right hon. Gentleman consider having a much greater in-


crease in the staff even than is proposed in the Factories Bill?

Sir S. Hoare: The hon. Member will recollect that I stated specifically that we contemplate a substantial increase in the inspectorate.

Mr. Kelly: I understand the answer to relate to the general run of factory inspectors, but I am asking for a greater increase in those engaged in inspecting electrical apparatus.

Sir S. Hoare: What I said covered an increase in the whole inspectorate.

Oral Answers to Questions — PUBLIC MEETINGS AND DEMONSTRATIONS, LONDON (PROSECUTIONS).

Mr. Sorensen: asked the Home Secretary how many prosecutions for offences in connection with public meetings or demonstrations have taken place in the Metropolitan area during the past 12 months?

Sir S. Hoare: The total number of prosecutions for offences in connection with public meetings or demonstrations in the Metropolitan area during the past 12 months is 320.

Mr. Sorensen: Can the right hon. Gentleman get information regarding the number of sentences?

Sir S. Hoare: Perhaps the hon. Member will put down a question.

Oral Answers to Questions — ECONOMIC LEAGUE (MANCHESTER POLICE).

Mr. Mander: asked the Home Secretary whether he is now able to make, a statement with regard to the alleged communication by the Manchester police of private information with regard to individuals to the Economic League?

Sir S. Hoare: I am informed that the Manchester Watch Committee, at a meeting held on 24th June, considered the allegations made against certain officers of the Manchester police force of communicating confidential information to the Economic League and unanimously adopted a resolution in the following terms:
That the Watch Committee is satisfied that the police files are kept strictly secret, that such files have not been placed at the disposal of the Economic League or any other organisation or person, and that the Com-

mittee does not consider that any action on its part is necessary.
I am further informed that the Chief Constable, who has, of course, gone into the matter very carefully himself, is satisfied that at no time have there been any improper transactions between his officers and the league and that no official information from the police records has ever been disclosed to the league.

Mr. Gallacher: Are we to take it that the relative of the Cabinet Minister is as unreliable as his relative?

Oral Answers to Questions — STREET TRADERS, LONDON.

Mr. Banfield: asked the Home Secretary whether he is aware that the presiding magistrate at the, Guildhall Justice Room, on 20th March, 1895, fined two street traders in public securities a total of £15 for obstructing Throgmorton Street; whether any change in this connection has been made in the instructions issued to the police since that date, and on what grounds are street traders in public securities now permitted to obstruct Throgmorton Street for the purpose of vending their wares; and will he give a list of public highways in the Metropolis which may be used for street trading without hindrance by the police?

Sir S. Hoare: I am informed that the fines referred to in the first part of the question were in respect of charges of assaulting the police and obstructing the police respectively. As regards the second part of the question, I have no responsibility, but I would refer the hon. Member to the reply given to the hon. Member for Wimbledon (Sir J. Power) on 5th May. As regards the last part of the question, local authorities in the Metropolitan Police district have certain powers of prescribing streets for the purposes of street trading, but I am not in possession of detailed information as to their exercise of these powers.

Mr. Garro Jones: Will the right hon. Gentleman request the Stock Exchange Committee, if this form of trading is necessary, to organise it with proper facilities indoors?

Sir S. Hoare: I understand that the use of Throgmorton Street is not causing impediment in the way of traffic, and I see no reason to interfere.

Mr. Garro Jones: What about the busy hours?

Oral Answers to Questions — SEX EQUALITY.

Mr. Day: asked the Home Secretary his Department's policy on the principle of equal rights for men and women; and whether he proposes introducing legislation to give effect to the same?

Sir S. Hoare: The provisions of the Sex Disqualification Removal Act generally represent the Government's position on this question, and no proposals for the amendment of that Act or for any similar legislation are under consideration.

Mr. Day: Are we to understand that the Government are not in favour of the principle of equal rights for women?

Sir S. Hoare: No, Sir. I have stated that our attitude is well represented by the Sex Disqualification Removal Act, and I see no reason for further legislation.

Oral Answers to Questions — MEETINGS, WEST INDIA DOCKS.

Mr. Gallacher: asked the Home Secretary on what grounds police-sergeant H 6 stopped a Communist meeting which was being held at West India Docks, at 12.30 noon on Thursday, 24th June, when a rival meeting started up five minutes later; whether he is aware that a promise was given that, in the matter of rival meetings, the police should follow the principle of first come first served; and whether, seeing that a large number of witnesses at this meeting testified that the Communist meeting had been in progress for some time when the Economic League speaker started the second meeting, he will give instructions to the police that the aforesaid ruling is to be enforced?

Sir S. Hoare: I have received a police report on this incident which does not accord with the statement of facts in the first part of the question. I am informed that the police sergeant, in the course of his patrol, came upon two meetings which were proceeding simultaneously within a few yards of each other; that he formed the opinion that a breach of the peace was likely, and accordingly requested the chairmen of both meetings to close their meetings; and that this request was immediately complied with. As regards the remainder of the question, the principle referred to is the subject of standing instructions by the Commissioner of Police, and I have no reason to think that it is not observed. The action of the police officer concerned in this case was entirely correct.

Mr. Gallacher: Is the right hon. Gentleman aware that I got this information from the Civil Liberties Committeee, and that they are very scrupulous in their investigations, and will he receive a deputation from that committee on this matter?

Sir S. Hoare: I have received my information from equally responsible quarters, and I can assure the hon. Member that his information, whatever may be the source of it, is not correct.

Mr. Gallacher: Is it not the case that the Minister has received his information from one of the parties that is being accused? Would it not be better to take his information from an independent source, such as the Civil Liberties Committee?

Oral Answers to Questions — FEDERATION OF INDIAN STUDENTS' SOCIETIES.

Mr. T. Williams: asked the Home Secretary on whose authority officers from Scotland Yard visited Mr. Prithu Pal Singh on 10th June and Dr. Sadashanker Chhabildas Mehta on 11th June; why these two persons were questioned about the policy of and about who was concerned with and financed the new magazine "Indian Student"; and on whose authority one of the officers forced an entrance into Dr. Mehta's house on nth June at 9 a.m. where, after asking a series of questions, he took full particulars from his passport?

Sir S. Hoare: I am informed by the Commissioner of Police that, information having been received that subscriptions were being solicited in London on behalf of a hitherto unknown body styling itself the Federation of Indian Students' Societies in Great Britain and Ireland, inquiries were made by the police in the ordinary course of their duties to ascertain the identity of the promoters and their bona fides. During the course of these inquiries Mr. Prithu Pal Singh was interviewed by a police officer, and he afterwards invited the officer to call on Dr. S. C. Mehta. This was done by another officer on the following day. I am informed that there is no truth in the statement that one of the officers forced an entrance into Dr. Mehta's house.

Mr. Williams: May I ask whether it is usual when a new magazine or periodical is announced to be published for officers


from Scotland Yard to select individuals who may or may not be contributors and interrogate them as to how far they are concerned with such magazine or periodical?

Sir S. Hoare: The procedure was quite normal in this case. The police made these visits to obtain information. They obtained the information and found the position quite satisfactory.

Mr. Williams: Is the right hon. Gentleman not aware that the Provincial Governments of India for many years have been providing approximately £800,000 per annum for the organisation, and will he say that Scotland Yard were not aware of its existence. In these circumstances does he not think that whether they are Indians or whoever they may be they are quite entitled, without being interrogated in this fashion, to establish a magazine for circulation among Indian students?

Sir S. Hoare: I would prefer not to deal with a general question of that kind. This case followed the normal procedure. The police made certain inquiries which did not imply any condemnation of the individuals concerned. They have to satisfy themselves, which they did.

Mr. Attlee: Will the right hon. Gentleman circulate in the OFFICIAL REPORT information as to the previous occasions on which the police have made this kind of inquiries so that we can judge how far it is the normal procedure?

Sir S. Hoare: I am not sure how far we have that information at our disposal, but I will look into it. Perhaps the right hon. Gentleman will put down a question.

Mr. Attlee: The right hon. Gentleman will realise that a great many new periodicals are started in this country, and it would be interesting to know on how many occasions the police have made this inquiry?

Sir S. Hoare: I will investigate the matter.

Mr. T. Williams: Will the right hon. Gentleman also investigate the statement in the question that a police officer forced his way into the house of Dr. Mehta while the doctor was in the bathroom?

Sir S. Hoare: I have made inquiries, and I am informed that that was not the case.

Oral Answers to Questions — FACTORIES BILL (OVERTIME EMPLOYMENT).

Mr. Mander: asked the Home Secretary what industries other than aerated waters it is contemplated may need the concession under the Factories Bill inserted with regard to special overtime?

Sir S. Hoare: I understand the hon. Member to refer to the amendment made on Report stage empowering the Home Secretary by Regulations to make certain variations in the conditions as to overtime employment of women so as to meet difficulties in trades liable to extreme pressure for quite short periods. I should be reluctant to encourage applications by naming particular industries; it must rest with those affected to make out a case for the issue of regulations, but we had particularly in mind factories in which Extreme pressure occurs at holiday seasons or just before Christmas.

Mr. Vyvyan Adams: asked the Home Secretary whether it is the policy of His Majesty's Government to discourage the working of overtime, especially by girls and women, in mills and factories?

Sir S. Hoare: The view of the Government, as indicated in the Debates on the Factories Bill and as clearly shown in the terms of the Bill, is that overtime employment of women and young persons, that is, employment over and above a maximum normal week of 48 hours, ought to be strictly regulated and that the overtime of young persons in particular should be reduced to the lowest practicable limits. The Bill, therefore, provides not only for a large reduction in the amount of overtime which can be worked, and is in many cases being worked, under the present Act, but also makes provision for reducing the overtime in any particular industry wherever that can be done without serious detriment to the industry. Further, as my hon. Friend is aware, it does not permit any overtime employment of young persons under 16.

Oral Answers to Questions — JUSTICES' CLERKS.

Mr. E. J. Williams: asked the Home Secretary whether he is aware of the tendency of magistrates in petty sessional divisions to delegate work to clerks to the justices on a part-time principle and to engage persons who, though permanently employed, have no contractual


obligations as to salary, security of employment, superannuation, and other rights which normally apply to such persons in local government and the Civil Service; and whether he will take appropriate steps to remedy the hardship which falls on these officers?

Sir S. Hoare: There are in England and Wales over goo Jerks to justices of whom only a small number—about 50 or 60—are full-time officials. Most of the others are solicitors in private practice who combine with such private practice part-time duties as clerks to justices. Some of the full-time clerks are already pensionable under local Acts, and there are in a Bill now before the House proposals for a general pension system for full-time clerks to justices. The question of giving a pensionable position to solicitors who combine with private practice part-time service as clerks to justices stands on a different footing, but I am considering what is the best method of bringing under review this and several related questions about the conditions of service of clerks to justices and their staffs.

Mr. Williams: I am concerned about the officers, but I am more concerned about the persons whom the clerks engage, and perhaps the right hon. Gentleman will look into that matter also?

Oral Answers to Questions — DARTMOOR PRISON (KNOCK SYSTEM).

Major Carver: asked the Home Secretary whether he has any further statement to make in regard to the alleged existence of the knock system at Dartmoor?

Sir S. Hoare: I understand that the authority for the alleged existence of the "knock" system was an article by an ex-convict which appeared in a newspaper on 18th June. I can only repeat that the allegation is entirely unfounded.

Oral Answers to Questions — FILM PRODUCTION (SPANISH ALIEN).

Miss Wilkinson: asked the Home Secretary whether he is aware that Captain Luis Antonio Bolin, the chief of the Press to General Franco, is now in England; that while in this country he is working at the Gaumont-British studios; and whether a labour permit has been applied for and granted to him?

Sir S. Hoare: It appears from the Home Office records that this person was resident in this country from 1923 to 1928 and from 1931 to the end of 1935, and that he returned here on 2nd June. I understand that since he returned to this country he has not been employed by Gaumont British Studios and the only work he has recently done at the studios, for which he received no payment, was to speak a few introductory words in Spanish in a film which is being booked for South America. In the circumstances no question of a permit arises.

Miss Wilkinson: Does the Minister think that in view of this gentleman's record in connection with the Press in Spain, and that he has been personally responsible for physical threats to French and British journalists, it is a sufficient reason for allowing this gentleman to return to this country during the present Spanish conflict?

Sir S. Hoare: I know nothing of the record to which the hon. Member has referred, but if she will send me any information on the subject I will consider it.

Miss Wilkinson: Thank you.

Brigadier-General Sir Henry Croft: Will the right hon. Gentleman take note of the desire expressed in the House that aliens should not come into this country to take the place of British workers?

Oral Answers to Questions — SCHOOL POPULATION, AND TEACHERS.

Mr. Sorensen: asked the Parliamentary Secretary to the Board of Education whether he has procured estimates of the elementary school population for each of the 10 years ahead, and the estimated number of teachers for the same period?

The Parliamentary Secretary to the Board of Education (Mr. Kenneth Lindsay): I would refer the hon. Member to Circular 1426 issued by the Board in April, 1933. This circular contains a report by the Government Actuary reviewing the estimate of the numbers of children in schools given by him in 1928 and carrying that estimate to 1948. The Board commended that report to the careful consideration of local education authorities as affecting the problem


of accommodation, staffing and organisation of schools with which they have to deal. The hon. Member will appreciate that while it is possible in this way to form an estimate of the total number of children who will be in the schools, it is not possible to estimate the number of teachers with the same degree of accuracy. This must depend on variable factors such as changes in local distribution and organisation which cannot be forecast for so long a period. The Board, however, have the question under constant review in consultation with the local education authorities.

Oral Answers to Questions — TOWN AND COUNTRY PLANNING.

Mr. Bossom: asked the Minister of Health how many town and country planning authorities of Great Britain include one or more towns of 20,000 inhabitants or over within their areas; how many town and country authorities do not include a town of that size; and in how many of the latter would a 1d. rate produce over £1,000 in any one year?

The Minister of Health (Sir Kingsley Wood): As the answer involves a number of figures I will, with my hon. Friend's permission, circulate it in the OFFICIAL REPORT.

Mr. Bossom: Will the right hon. Gentleman give some indication as to how many areas to-day receive less than £1,000 as a result of a 1d. rate?

Sir K. Wood: Certain other considerations arise in this matter, and I would prefer my hon. Friend to study my reply, and then put a further question if he so desires.

Following is the answer:

There are 386 authorities in England and Wales with a population of 20,000 or over, in the whole or part of whose areas schemes are in operation or in course of preparation either by the authority themselves or by a joint committee or a county council. Seven hundred and nine authorities with a population of less than 20,000 have schemes in operation or preparation for the whole or part of their area, but of these 491 are being planned by a joint committee or a county council and 50 more by the authorities of adjoining districts. The remaining 168 have or are preparing

schemes for their own districts, and of these two have a penny rate product of over £1,000. In many cases the county council are contributing to the cost of the scheme. The foregoing figures need some qualification because in some cases an area is being planned partly by one authority and partly by another. Any inquiry with regard to Scotland should be addressed to the Secretary of State.

Mr. Kelly: asked the Minister of Health the number of appeals under the Town and Country Planning Act in London since March, 1935; and how many of these appeals were dismissed?

Sir K. Wood: Excluding appeals which have been withdrawn or otherwise lapsed, and appeals which are not yet decided, 78 appeals under the Town and County Planning Act have been received from the Administrative County of London since 1st April, 1935. Of these 45 were dismissed, nine settled by agreement, and 24 allowed.

Mr. Kelly: How many applications does that mean, and what percentage of the applications has been allowed?

Sir K. Wood: I will try to work it out for the hon. Member.

Oral Answers to Questions — OLD AGE, ETC., PENSIONERS (PUBLIC ASSISTANCE).

Mr. E. Dunn: asked the Minister of Health how many widowers, widows and orphan children are in receipt of pensions and allowances under the Old Age Pension Act and Widows' and Orphans' Contributory Pensions Act in England and Wales, respectively; how many are chargeable to public assistance committees, giving the total amounts paid, in the years 1933, 1934, 1935 and 1936; and will he produce a table of figures giving details of the respective counties?

Sir K. Wood: As the answer contains a number of figures, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Following is the answer:

The figures for widows and children in receipt of widows' and orphans' pensions and allowances under the Contributory Pensions Act are shown in the table below. As information is not available as to the marital status of old age pen-


sioners, it is regretted that the number of widowers and widows in receipt of old age pensions cannot be given.

Pensions and allowances in payment on the 31st December, 1936.



England.
Wales.


Widows' pensions
650,686
45,957


Allowances for children payable as part of widows' pensions
234,112
19,733


Orphans' pensions
12,603
1,329

The following statement shows the number of widows and orphans in England and Wales in receipt of pensions under the Contributory Pensions Act who were also in receipt of poor relief on 1st January of the years indicated. I regret that I have no information as to the amounts expended on relief:


Year.



Widows.
Orphans.


1933
…
…
…
47,366
953


1934
…
…
…
49,575
886


1935
…
…
…
52,533
942


1936
…
…
…
59,051
941


1937
…
…
…
61,837
1,065

The information asked for in the last part of the question would involve the extraction of a large number of entries from the returns of local authorities, and I do not consider that the value of the statement would be commensurate with the time and labour which its compilation would entail. I should be happy, however, to supply the figures for any county in which the hon. Member may be specially interested.

Mr. J. Henderson: asked the Minister of Health the number of old age pensioners and widow pensioners in receipt of relief from the Manchester public assistance committee?

Sir K. Wood: The numbers of old age pensioners and widow pensioners in Manchester who were also in receipt of poor relief on 1st January, 1937, the latest date for which figures are available, were 5,891 and 1,730 respectively.

Mr. G. Griffiths: asked the Minister of Health the number of widows who are receiving pensions and public assistance in the West Riding County Council area; and the number of contributory pensioners and old age pensioners who are receiving public assistance in the West Riding County Council area?

Sir K. Wood: The number of widow pensioners and the number of old age pensioners in the area of the West Riding

County Council who were also in receipt of poor relief on 1st January, 1937, the latest date for which figures are available, were 3,169 and 8,523 respectively. The latter figure includes an unascertained number of persons between 65 and 70 years of age who were in receipt of old age pensions under the Contributory Pensions Act.

Mr. Griffiths: Seeing that the figures are so large, does not the Minister think that he ought to bring in legislation for increased pensions?

Sir K. Wood: That matter has been replied to on several occasions.

Mr. J. J. Davidson: Is not the Minister of the opinion that England comes first?

Oral Answers to Questions — PUBLIC HEALTH.

INFANT WELFARE (TREATMENT CENTRES).

Mr. Sorensen: asked the Minister of Health how many centres for the treatment of young children between two and five years of age have been, or are being, established in England and Wales?

Sir K. Wood: Although separate sessions are held at many infant welfare centres for children of this class, it is not usually desirable to establish separate centres, and children of all ages up to five are seen at infant welfare centres which numbered 3,368 in England and Wales on 31st December last. I may add that the primary purpose of these centres is preventive and advisory, and that children are when necessary referred elsewhere for the appropriate form of treatment.

Mr. Sorensen: Is the right hon. Gentleman aware that many educational organisations are encouraging the establishment of clinics for these very young children, and, in view of that, will he circularise education and health authorities in the very near future regarding this particular development?

Sir K. Wood: Perhaps the hon. Member will allow me to consider that.

IMPORTED CHEESE.

Mr. Liddall: asked the Minister of Health whether his Department obtains official certification that the herds of goats from the milk of which imported gorgonzola cheese is made are free from disease; and whether imported cheeses


from foreign sources are continuously tested at our ports of entry to prevent the sale here of cheese containing germs of undulant fever or Mediterranean fever or other diseases endemic among South European herds of goats?

Sir K. Wood: No, Sir. The matter has not, however, escaped attention and I am advised that on the evidence available, no special precautions appear to be necessary.

Mr. Leonard: Does the germ survive the cheese?

Sir K. Wood: It may be of some comfort to the hon. Gentleman to know that any germs there may be are destroyed during the maturing of the cheese.

OFFICES REGULATION.

Mr. Creech Jones: asked the Minister of Health what instructions he has issued to local authorities in the matter of health conditions of office workers; and whether he has recommended any minimum standards of working conditions and any system of systematic inspection of offices?

Sir K. Wood: I am sending the hon. Member a copy of a circular which I have issued urging local authorities systematically to exercise their powers under the Public Health Act, 1936. In view of the procedure laid down by the Act, it would not be appropriate for me to make such a recommendation as is suggested in the second part of the question.

Mr. Creech Jones: Will the Minister call for periodical reports from local authorities, in view of the great anxiety shown in the Debates in the House when the Offices Regulation Bill was being discussed?

Sir K. Wood: I will consider that.

Mr. Watkins: Is there any ground for supposing that tuberculosis is increasing among office workers?

Sir K. Wood: Perhaps the hon. Member will put that question on the Paper.

Mr. Thorne: Is the right hon. Gentleman aware that there is a good deal of division of opinion among different town clerks in different parts of the country as

to whether they have the right to inspect offices?

Sir K. Wood: This matter is dealt with in the circular, of which I am sending the hon. Member a copy.

Oral Answers to Questions — HOUSING.

SLUM CLEARANCE.

Mr. Day: asked the Minister of Health whether the Government intend to announce and lay proposals before the House in the near future of their further plans for slum clearance?

Sir K. Wood: If the hon. Member has in mind the question of Exchequer assistance, I would refer him to the answer which I gave on 23rd March to the hon. Member for North Cumberland (Mr. W. Roberts).

Mr. Day: In view of the right hon. Gentleman's previous promise to let the House know what the Government's proposals were, can he say when these will be made?

Sir K. Wood: Perhaps the hon. Member will kindly study the reply.

Mr. V. Adams: asked the Minister of Health whether he will introduce a short Bill to secure to appellant owners of property scheduled for clearance a hearing by a judicial tribunal independent of the officers of the Ministry of Health?

Sir K. Wood: The issue involved in my hon. Friend's question was exhaustively discussed during the passage of the Housing Act, 1935, and I see no reason for reopening the question at the present time.

Mr. Adams: Is that any reason for failing to redress something which is obviously contrary to the principles of English justice?

Sir K. Wood: That was similarly discussed.

Mr. Adams: Does the right hon. Gentleman not know that, although there was no free vote, there was a very large minority in favour of such a proposal among Members who normally support the Government?

Sir K. Wood: I regret to hear that.

Mr. Rostron Duckworth: asked the Minister of Health the names of all towns of 25,000 in population which have made any allowance to shopkeepers dispossessed in respect of slum-clearance operations?

Sir K. Wood: As the answer contains the names of a large number of local authorities, I will send my hon. Friend a list.

Mr. Duckworth: asked the Minister of Health whether he has found a readiness on the part of local authorities to make payment in respect of well-maintained houses involved in slum-clearance schemes; and whether it has been necessary to issue any reminder to any of them who have never made any such awards at all?

Sir K. Wood: The awards to which my hon. Friend refers are made on my direction, and local authorities have no discretion in the matter. I have to date given such directions in respect of 2,951 houses involved in slum clearance schemes. If, however, my hon. Friend has any particular case in mind, perhaps he will let me have particulars and I shall be glad to make inquiries.

Mr. Mabane: Has the right hon. Gentleman received any requests for loans from local authorities?

Sir K. Wood: I must have notice of that question.

DEPWADE RURAL DISTRICT.

Mr. T. Smith: asked the Minister of Health whether he is aware of the lack of suitable housing accommodation in the Depwade rural district of Norfolk; that a family at Burston are by order of the court threatened with eviction if they have not vacated the cottage during the next three weeks; and whether, in view of the fact that there is no chance of their finding another house in the village and that the tenant's wife is ill and not fit to be moved, he will intervene to prevent the eviction taking place until suitable alternative accommodation is provided?

Sir K. Wood: The rural district council have recently submitted proposals for the erection of 185 houses including eight in the parish of Burston. I have no information with regard to the threatened eviction to which the hon. Member refers and no jurisdiction in the matter. I am, however, making inquiries and will communicate further with the hon. Member.

WIDOW'S PENSION.

Mr. V. Adams: asked the Minister of Health whether he has examined the case of Mrs. Arthur Braime, of 1, Raynville Road, Bramley, Leeds, who has been disallowed a widow's pension on the ground that 104 weeks did not elapse between her late husband's entry into insurance on 15th October, 1934, and his death on 9th October, 1936; whether he is aware that Mr. Braime's insurance cards were stamped with exactly two years' stamps in respect of 104 weeks of insurance; and what action he proposes in the matter?

Sir K. Wood: I am aware of the facts of this case. The Act specifically requires as a condition for the award of a widow's pension not only that 104 contributions shall have been paid, but also that 104 weeks shall have elapsed between the husband's entry into insurance and his death. This condition is not satisfied in Mrs. Braime's case, and I regret, therefore, that there is no power to award her a pension.

Mr. Adams: Are not the proper payments of 104 weeks contributions enough?

Sir K. Wood: No, I am sorry to say that in this case, which I recognise is a hard one, a double condition has to be fulfilled.

Mr. Adams: Is not this lady, then, the victim of a technicality?

Sir K. Wood: I am afraid that is the position as laid down in the Act of Parliament.

Mr. Batey: Does the Minister not consider, as there are so many hard cases, that the time has come to amend the Act?

Sir K. Wood: I think that in every friendly society scheme and in every trade union scheme there must be conditions of this character.

Mr. Batey: That does not answer my question.

Oral Answers to Questions — CORONATION MEDALS.

Mr. Mander: asked the Prime Minister whether it is proposed to issue, on the responsibility of the Government, Coronation medals to any classes of the community; and, if so, what system of distribution is contemplated?

The Prime Minister (Mr. Chamberlain): No, Sir.

Mr. Mander: Will the Prime Minister be good enough to say whether I am right in assuming that no Government responsibility was involved in the recent issue of Coronation medals?

The Prime Minister: That is so.

Mr. Thurtle: Will the Prime Minister consider whether, as an act of grace, these Coronation medals can be awarded to the members of the Parliamentary Liberal party?

Oral Answers to Questions — IMPERIAL AIRWAYS, LIMITED (SHARE ISSUE).

Sir John Mellor: asked the Chancellor of the Exchequer whether the Government, as holder of the whole of the issued deferred shares of Imperial Airways, Limited, consented to the recent offer to the public of new ordinary shares at a price substantially below the market price of the existing ordinary shares; whether the Government were consulted with regard to the payment of underwriting commission by the company; and whether, in view of the subsidy payable by the Government to the company, he is satisfied that the terms of the offer were in accordance with the best interests of the company and with the policy of the Government?

The Chancellor of the Exchequer (Sir John Simon): The answers to the first and last parts of the question are in the affirmative. The condition which the Government laid down in negotiating the new contract with the company was that in making any issue the company should raise capital on the most advantageous terms practicable at the time the issue was made. This principle would exclude any issue to existing shareholders on bonus terms, but would not preclude applications from such shareholders from receiving preferential consideration in allotment. In settling the terms of the recent issue the Board complied with these conditions. It is true that the price of issue was considerably below the market price at the time, but that price was regarded as unduly inflated, and the Board felt that they could not, consistently with their responsibilities, accept it as a guide to the price at which they could properly invite the public to

subscribe for an enterpise of such novelty and magnitude as the new Agreement with the Government involves. As regards underwriting commission, the Government were informed that the Board proposed to underwrite the issue in the ordinary way and offered no objection. They were informed by reference to the draft prospectus of the terms on which this was arranged.

Sir J. Mellor: Does my right hon. Friend really think that 30s. 1s the best price that could be obtained, and could lie explain how it can possibly be satisfactory to the Government or to any other shareholder that shares should be offered at a lower price than could be obtained by way of offering them for public subscription, when a much better price could be obtained from the shareholders themselves?

Sir Frank Sanderson: Is it not a fact that these shares have been issued, or are to be issued, at a premium of no less than 50 per cent. above par value?

Sir J. Simon: The answer I have given really deals with those points. As far as Government responsibility is concerned, we have ourselves been very careful to make all possible inquiries, and, as I have said, the Board felt that they could not, consistently with their responsibilities, accept the quotation that has been made of the shares from day to day as though it were the proper price at which the issue should be made.

Mr. Herbert Morrison: Can the right hon. Gentleman inform the House how it is that the Government are paying a subsidy to this concern which is issuing shares at an inflated price?

Sir J. Simon: I understand that the right hon. Gentleman's suggestion is that the shares are being issued at an inflated price. The suggestion of the other hon. Member is exactly the opposite.

Mr. Morrison: May I have an answer to the question? How is it that in the case of a concern which is issuing shares at a very high price above par value—50 per cent.—the Chancellor of the Exchequer is consenting to a continuance of the subsidy paid out of public funds?

Sir J. Simon: The subsidy is part of the general policy connected with the development of air communications. The question of the circumstances in which the


shares are being issued at particular price is a separate matter.

Mr. Garro Jones: Does the Chancellor of the Exchequer realise—[Interruption.]

Oral Answers to Questions — MONETARY POLICY.

Mr. Liddall: asked the Chancellor of the Exchequer whether he is aware that the absorption by India of Transvaal gold 40 years ago prevented world inflation of commodity prices and costs of living; and whether he will request his experts to devise some policy by which cambists and merchants can assist India to attract back by natural processes some of the £230,000,000 of gold exported by India since 1931 as a result of the manipulation of the dollar price of gold?

Sir J. Simon: I do not think that it would be possible to devise any effective policy to accelerate a movement of this kind, which depends on many natural factors, such as the degree of prosperity in India.

Sir N. Grattan-Doyle: asked the Chancellor of the Exchequer whether he is taking into account the opinion that a change in the $35 per ounce American value of gold for sterilisation is inevitable though not imminent and that alteration of the franc-sterling rate is probable; and will he endeavour to obtain from the two Governments concerned at least 30 days warning of any alteration so that British manufacturers and exporters may not suffer losses by being taken unawares in their exchange commitments, as differentiated from in-and-out share-market and commodity speculations and transactions of bond selling, flotation, and arbitrage firms?

Sir J. Simon: I am afraid that my hon. Friend's suggestion is impracticable. The first contingency he suggests is purely hypothetical, while as regards the second contingency, of an alteration in exchange rates, it must be obvious that even if a Government itself knew 30 days in advance what steps it would be driven to take, it could not give public notice of them without precipitating an immediate crisis.

Mr. Boothby: Are there any grounds nowadays for supposing that anything is inevitable?

Mr. Bellenger: asked the Chancellor particular of the Exchequer whether he has received any intimation from the new French Government as to their attitude towards the Tripartite Currency Agreement; and whether he has any statement to make?

Sir J. Simon: As stated in the reply which I gave to the right hon. Gentleman the Leader of the Opposition yesterday, the French Government have assured me that they are anxious to continue close co-operation with the Governments of the United States and the United Kingdom. I have to-day sent the following reply to the French Minister of Finance:
Now that you as French Minister of Finance have been given the full powers which you sought to deal with the present situation, I look forward to a continuation of close co-operation between our Treasuries under the Tripartite Declaration. I desire to express to you the sincere hope that France will soon emerge from the temporary difficulties with which she is now confronted.
I understand that a similar message is being sent to him by the Secretary of the United States Treasury.

Mr. Bellenger: In view of the changed conditions in regard to the exchange value of the franc, does the right hon. Gentleman contemplate any alteration in the exchange value of the dollar and sterling in the near future?

Sir J. Simon: That, I think, is rather a different matter, but I do not contemplate any alteration in existing policy.

Oral Answers to Questions — EXCHANGE EQUALISATION ACCOUNT.

Mr. Bellenger: asked the Chancellor of the Exchequer the cost of one year's interest charges and management expenses to the latest convenient date of the Exchange Equalisation Account?

Sir J. Simon: Under Section 24 (5) of the Finance Act, 1932, such borrowing as is required for the purpose of making issues to the Exchange Equalisation Account is part of the National Debt and it is not possible to earmark to that account a particular part of the general charge for interest and management of the National Debt. But an estimate of the maximum expense involved even if the whole of the account were continuously in use can be reached by applying the average rate for Treasury Bills which was 11s. 8d. per cent. last


year. The expenses of management, including the cost of handling gold, are of the order of £30,000 a year.

Oral Answers to Questions — COINAGE.

Mr. Leckie: asked the Financial Secretary to the Treasury whether he is aware that orders placed with the Royal Mint before the Coronation for sets of new coins have not been executed yet and may not be delivered for another four months; and whether, to hasten matters, he will suggest to the Mint that they should enlist the help of medallists in the provinces?

The Financial Secretary to the Treasury (Lieut.-Colonel Colville): The shortness of the time available since the Accession made it from the first impossible to prepare these collectors' sets simultaneously with the supplies which were urgently required for general circulation, and accordingly all applicants were warned that none could be available until well after the Coronation. Nevertheless a substantial first issue is being made next week and deliveries will be continued weekly hereafter. I regret I cannot adopt the suggestion contained in the last part of my hon. Friend's question.

Oral Answers to Questions — NATIONAL ART COLLECTIONS.

Mr. Kelly: asked the Financial Secretary to the Treasury the number of pictures in the Tate Gallery and the National Gallery that have received conservation treatment as distinguished from restoration?

Lieut.-Colonel Colville: I would refer the hon. Member to the annual reports of the directors of the National and Tate Galleries, in which he will find full particulars of the repairs to pictures effected in each Gallery in successive years. I am sending him a copy of the last issued report.

Mr. Kelly: Why is there no reference in that report to the conservation of pictures?

Lieut.-Colonel Colville: The report shows what has been done in the case of each picture. It is difficult to distinguish between conservation and restoration, but if the hon. Member reads the report, he will see exactly what has been done.

Oral Answers to Questions — AGRICULTURE.

LIME.

Mr. Sexton: asked the Minister of Agriculture (1) the average price per ton at the kilns of lime for agricultural purposes in England and Wales for the years 1934, 1935 and 1936, respectively;
(2) the annual production of lime in this country for agricultural purposes for the years 1913, 1935 and 1936, respectively, and the localities of production?

The Minister of Agriculture (Mr. W. S. Morrison): I regret that the figures asked for by the hon. Member are not obtainable, owing to the difficulty of distinguishing between lime produced for industrial and for agricultural purposes, and to the numerous grades and qualities of lime involved. The hon. Member will appreciate that lime and chalk are very widely produced in Great Britain.

OATS.

Mr. De la Bèere: asked the Minister of Agriculture, in view of the discontent among farmers whose main crops are oats that they are being restricted to 2 cwts. off the farm, which represents only one-third production per acre, what steps the Government are taking to give them equal treatment with the producers of wheat?

Mr. W. S. Morrison: I would refer my hon. Friend to the statement I made to the House on 27th May, in which I explained that the proposed acreage subsidy for oats would be calculated on the basis that, on the average, about 6 cwts. per acre are sold off farms, and that the payment would, therefore, be equal to six times the difference between the standard price and the market price per cwt.

Mr. De la Bère: May I ask the right hon. Gentleman as the friend of the farmer, whether he is aware that what farmers really want is money at 2½ per cent., and not at 5 per cent.?

Oral Answers to Questions — OGMORE RIVER (DRAINAGE).

Mr. E. J. Williams: asked the Minister of Agriculture whether he has communicated with the Glamorgan Catchment Board about the serious state of the Ogmore river; and what action is proposed to remedy the matter?

Mr. W. S. Morrison: Yes, Sir, I brought the hon. Member's question of 7th June to the notice of the Catchment Board, but I have so far received no indication of the action they propose to take in the matter.

Mr. Williams: Will the right hon. Gentleman have further inquiries made about this matter in order that measures to deal with it may be expedited?

Mr. Morrison: I will keep the matter under review and do what I can to help, but it is primarily a question for the Catchment Board.

Mr. Williams: Would the right hon. Gentlemen be prepared to give some financial help to the Catchment Board in this matter?

Mr. Morrison: That is a different question.

Oral Answers to Questions — SCOTLAND.

MENTAL INSTITUTIONS.

Mr. R. Gibson: asked the Secretary of State for Scotland when he will be able to make a statement regarding the hours of employment of members of the staff and others in mental institutions in Scotland?

The Under-Secretary of State for Scotland (Mr. Wedderburn): I hope that the returns which have been called for from the several mental institutions in Scotland will have been received and tabulated at an early date. The information so obtained will be communicated to the hon. and learned Member without avoidable delay.

Mr. Gibson: May I expect it before the end of this month?

Mr. Wedderburn: I hope it will be available the week after next.

HOUSING.

Mr. Kennedy: asked the Secretary of State for Scotland whether, in view of the shortage of houses in the areas affected, it is the intention of the Government to enable the county councils and local authorities in Scotland to reconsider their decision to stop house building by means of increased subsidy or effective control of the rising prices of building materials?

Mr. Wedderburn: I am not in a position to add anything to the very full statement made by my right hon. Friend on this subject during the Debate on 24th June.

Mr. Kirkwood: asked the Secretary of State for Scotland whether he is aware of the ramp arising in the building trade; that the price of bricks has risen 25 per cent. recently, cement 10 per cent., soft woods 85 per cent., light iron castings 50 per cent., lead water-pipes 100 per cent., copper 50 per cent., and fireclay goods 35 per cent., owing to the growth of monopolies and combines; and what steps does he propose to take without delay in order that houses may be provided in Dumbarton and Clydebank?

Mr. Wedderburn: I am aware that the price of the building materials referred to has increased although generally not to the extent indicated by the hon. Member. I am informed that with the exception of bricks there have been no increases in recent months and certain materials show a tendency to fall in price. With regard to the position in Dumbarton and Clydebank, I would refer the hon. Member to the detailed statement made by my right hon. Friend during the Debate on 24th June on the measures that are being taken to deal with our present difficulties.

Mr. Kirkwood: Is the Under-Secretary aware of the part played by the Secretary of State for Scotland in the first National Government when they stopped house building in Clydebank, the reason then given being that there was no work? Now we have industry booming and we do not know what to do with the men and women who are being brought into Dumbarton and Clydebank, and seeing that the Government were responsible for the stoppage under those conditions, will they, now that the conditions have changed, use their influence to assist us in getting, not only the labour, but the materials necessary in order to build houses for the workers there?

Mr. Wedderburn: I think both those points—the question of labour and the question of materials—were fully dealt with in the Debate last Thursday.

Mr. Kirkwood: Is the Under-Secretary aware that we have at present a scheme of 600 houses and that we have only five bricklayers?

Mr. Wedderburn: That is a very good illustration of what we said last Thursday. There is another scheme in Dumbarton at present, of 200 houses where there are only five bricklayers.

Oral Answers to Questions — TRADE AND COMMERCE.

AIRCRAFT (EXPORT).

Mr. Noel-Baker: asked the President of the Board of Trade how many aircraft and aircraft engines were exported from Great Britain during the periods from 1st January to 31st May, 1936, and 1937, respectively?

The President of the Board of Trade (Mr. Oliver Stanley): As the answer involves a table of figures, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Statement showing the number of complete aeroplanes and of aeroplane engines exported from the United Kingdom during the periods specified.



Exports of United Kingdom manufacture.
Exports of imported merchandise.


Period.
Complete aeroplanes.
Aeroplane engines.
Complete aeroplanes.
Aeroplane engines.


1st January to 31st May:
No.
No.
No.
No.


1936
178
232
1
10


1937
170
279
3
10

Mr. Garro Jones: asked the President of the Board of Trade how many aircraft were exported from this country in the financial years ended March, 1936, and March, 1937; and what were the makes of the aircraft so exported and the countries to which they were consigned?

Mr. Stanley: I am having a statement prepared showing such of the information as is available, and I will circulate it in the OFFICIAL REPORT as soon as possible. It is the general practice not to give information regarding the trade of individual manufacturers.

Mr. Garro Jones: May I ask the right hon. Gentleman whether he has not already in his possession the two figures showing the total number of aircraft exported in 1936 and 1937?

Mr. Stanley: Yes, but not the countries to which they go.

Mr. Garro Jones: Will the right hon. Gentleman give those two figures?

Mr. Dalton: In what the right hon. Gentleman is circulating in the OFFICIAL REPORT, will he give particulars of the direction of the exports as regards aircraft engines so that we may know what countries are having their military power strengthened to the profit of British manufacturers?

Mr. Stanley: There is a further question on that point. I am afraid that the figures will not give the hon. Gentleman the knowledge that he wants.

Mr. Dalton: Will the right hon. Gentleman be prepared to give it if a question is put down?

Mr. Stanley: I am afraid that the particulars will not bear the inference the hon. Gentleman draws from them.

Following is the answer:

Mr. Stanley: I have not got them with me, because I thought the hon. Gentleman wanted the figures together, but I will send them to him as soon as I can.

Mr. H. G. Williams: Are not the figures in the Trade and Navigation Returns in the Vote Office and available to all Members who take the trouble to look them up?

Mr. Lawson: Is there any contact between the Department and the Minister for the Co-ordination of Defence on this matter?

Mr. Stanley: There is contact between my Department and all Departments on anything of joint concern.

Mr. Lawson: Do we understand that the right hon. Gentleman's Department gives licences for the export of engines when the Minister for the Co-ordination of Defence tells the House that there is need for such engines in this country?

Mr. Stanley: There is the closest possible co-ordination between the two Departments.

IRON AND STEEL INDUSTRY.

Wing-Commander Wright: asked the President of the Board of Trade whether he will consider reducing the duty on steel imported from the United States of America to 12½ per cent. in order that manufacturers may be able to buy supplies to keep their workpeople in employment until such date as the Iron and Steel Federation can give sufficient supplies?

Mr. Stanley: The question of the steps to be taken to increase imports of iron and steel is being actively considered, and I hope it will be possible to make an announcement on the subject early next week.

Mr. H. G. Williams: asked the President of the Board of Trade when he expects to publish the report upon the iron and steel industry prepared by Lord May; and whether any of the recommendations in the report will involve legislation?

Mr. Grant-Ferris: asked the President of the Board of Trade when he hopes to publish the report of Lord May on the iron and steel industry?

Mr. Stanley: I hope that copies of the report of the Import Duties Advisory Committee on the iron and steel industry will be available to Members on Tuesday evening next. There is no recommendation for immediate legislation.

Oral Answers to Questions — TRADE DISPUTE, MANCHESTER.

Mr. Rhys Davies: asked the Minister for the Co-ordination of Defence whether his attention has been called to the strike of 800 workpeople against a wage of 40s. per week for adult men and 25s. for adult women in the Greengate and Irwell Rubber Works, Manchester; and whether this firm is on the list of contractors for His Majesty's Government?

Major Sir George Davies (Comptroller of the Household): I have been asked to reply. The answer to the first part of the question is in the negative, and to the second in the affirmative.

Mr. Davies: Will the hon. and gallant Gentleman convey to his right hon. Friend the desirability, if this firm does any work for the Government, of observing the fair wages clause?

Sir G. Davies: If the hon. Gentleman has any complaint that the fair wages clause in Government contracts is not observed, he should address the Department responsible for the contract.

Mr. Davies: Will not the fact that I have raised this issue in the House be sufficient notice of the complaint that they are not doing the right thing?

Mr. Mander: Do the Government consider that 40s. is a sufficient wage for the men?

Oral Answers to Questions — REGENT'S PARK.

Mr. Liddall: asked the First Commissioner of Works whether he is aware that at the back of the north hedge of the Hylas garden in Regent's Park there is still an untidy shrubbery and path; and will he invite Lincoln horticultural firms to submit an inexpensive decorative design by which to convert this area into an enlargement of the Hylas garden for the enjoyment of the public?

The First Commissioner of Works (Sir Philip Sassoon): A scheme for dealing with this area is already being prepared by my own staff, and I hope that it will be possible to commence work on it this autumn.

Oral Answers to Questions — TOLL BRIDGES.

Mr. Parker: asked the Minister of Transport the number of toll bridges on public highways in Great Britain; how soon they are to be freed; and what was the number five years ago?

The Minister of Transport (Mr. Burgin): The answer to the first part of the question is 73, of which four have been by-passed; to the second part, I am afraid I cannot say; and to the third part, 87.

Oral Answers to Questions — COAL INDUSTRY (RESEARCH).

Mr. G. Hall: asked the Secretary for Mines the annual expenditure on research for all purposes carried out by his Department; and will he give the amount spent on each branch of research separately?

The Secretary for Mines (Captain Crookshank): The only researches for which I have any measure of direct responsibility are those of the Safety in Mines Research Board and the expenditure on those during each of the past two financial years has been a little over £58,000 a year, of which £1,750 appears on the Vote of the Mines Department, the balance being provided from the Miners' Welfare Fund. Particulars of the many different branches of the board's work in matters of safety and health are published in their annual reports and I am sending the hon. Member a copy of the last published report.

Oral Answers to Questions — SPAIN.

Mr. Attlee: (by Private Notice) asked the Secretary of State for Foreign Affairs whether he can make any further statement regarding the evacuation of refugees from Santander?

The Under-Secretary of State for Foreign Affairs (Viscount Cranborne): Yes, Sir. The French Ambassador informed my right hon. Friend this morning that, in view of the urgency of the matter, the French Government were prepared to allow the "Habana" to convey women, children and refugees of non-military age from Santander to Bordeaux, provided that it is clearly established that these refugees are proceeding in transit through France to other parts of Spain. I understand that the French Government will require that detailed lists of those refugees to be embarked shall be provided, or that, failing this, the authorities at Santander shall provide statements of the numbers of women, children and others to be evacuated, and that these statements shall be visaed by the French consular agent at Santander. I understand further that the refugees thus proceeding will be able on disembarking at Bordeaux to indicate their destination across the Spanish frontier, and that facilities will be given to His Majesty's Consul at Bordeaux to proceed on board the "Habana" on arrival to verify their numbers. Any men of military age found on board on arrival will be sent back and not allowed to land.
His Majesty's naval authorities are being requested to provide naval protection for the "Habana" to proceed from Bordeaux to Santander and to return

thence to Bordeaux after embarking the refugees, and my information is that the French Government will issue the necessary instructions to their authorities in regard to the measures to be taken on the arrival of the vessel at Santander.
The possibility of the French Government being prepared to receive further refugees proceeding by other ships for the purpose of crossing France en route for other parts of Spain is understood to be conditional on the acceptance by the Spanish authorities of the measures which the French Government may consider necessary in order to satisfy themselves as to the numbers, nature and destination of such persons. I understand that the Spanish Government are already in communication with the French Government on this subject.

BUSINESS OF THE HOUSE.

Mr. Attlee: May I ask the Prime Minister whether he will state the business of the House for next week?

The Prime Minister: The business will be as follows:

Monday:—Second Reading of the Agriculture Bill, which we hope to obtain by about 7.30; Committee stage of the Milk (Money) Resolution.

Tuesday:—Supply (16th Allotted Day) Committee—Ministry of Labour Vote.

Wednesday:—Conclusion of the Committee stage of the Finance Bill, and other Orders.

Thursday and Friday:—Committee stage of the Agriculture Bill.

On any day, if there is time, progress will be made with other Orders.

Mr. Attlee: If the Second Reading of the Agriculture Bill should go to a late hour I suppose that it is not the intention to take the Milk (Money) Resolution?

The Prime Minister: I would not say that it will not be started, but certainly, if the Agriculture Bill discussion goes on to a late hour, we shall not proceed far with the Money Resolution.

Mr. Attlee: Do the Government propose to give time for the discussion of the proceedings at the Imperial Conference?

The Prime Minister: When the right hon. Gentleman put a similar question to me last week, I suggested to him that the matter might be discussed through the usual channels. I understand that some discussion has already taken place, and I think that is the best way of pursuing the matter further.

Mr. Wedgwood Benn: May I ask the Prime Minster whether, supposing it happens that the Government have an important change in their policy as regards intervention in Spain, the business will be re-arranged so that an announcement may be made first in the House and debated here?

The Prime Minister: That seems to be a very hypothetical question. It depends on what the circumstances are.

Mr. Attlee: With regard to the Imperial Conference, I take it that the Government do consider that important business was done at the Conference which this House ought to discuss. It is hardly a matter that we can raise on a Supply Day. What I am asking is that the Government should give time so that the House may have an opportunity of discussing the important issues raised at the Conference.

The Prime Minister: If the right hon. Gentleman will be good enough to put his question down again next week, we may be able to have some further discussions in the meantime.

Ordered,
That the Proceedings in Committee on the Exchange Equalisation Account Bill be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."—[The Prime Minister.]

NEW MEMBER SWORN.

Geoffrey Clegg Hutchinson, esquire, for the Borough of Ilford.

LOCAL GOVERNMENT SUPERANNUATION (SCOTLAND) BILL.

Reported, with Amendments from Standing Committee C.

Bill, as amended (in the Standing Committee), to be considered upon Tuesday next, and to be printed. [Bill 179.]

Minutes of Proceedings to be printed.

MESSAGE FROM THE LORDS.

That they have agreed to,—

Amendments to—

National Trust for Places of Historic Interest or Natural Beauty Bill [Lords],

Kingsbridge and Salcombe Water Board Bill [Lords],

Taf Fechan Water Supply Bill [Lords],

Warrington Corporation Bill [Lords], without Amendment.

That they have passed a Bill, intituled, "An Act to confirm a Provisional Order of the Minister of Health relating to the borough of Bridlington." [Ministry of Health Provisional Order Confirmation (Bridlington) Bill [Lords.]

Also a Bill, intituled, "An Act to confirm a Provisional Order of the Minister of Health relating to the borough of Guildford." [Ministry of Health Provisional Order Confirmation (Guildford) Bill [Lords.]

And also, a Bill, intituled, "An Act to confirm a Provisional Order of the Minister of Health relating to the Rhymney Valley Sewerage District and Western Valleys (Monmouthshire) Sewerage District." [Ministry of Health Provisional Order Confirmation (Rhymney Valley Sewerage District and Western Valleys (Monmouthshire) Sewerage District) Bill [Lords.]

MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (BRIDLINGTON) BILL [Lords].

Read the First time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill 180.]

MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (GUILDFORD) BILL [Lords].

Read the First time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill 181.]

MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (RHYMNEY VALLEY SEWERAGE DISTRICT AND WESTERN VALLEYS (MONMOUTHSHIRE) SEWERAGE DISTRICT) BILL [Lords].

Read the First time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill 182.]

METHYLATED SPIRITS (SCOTLAND) BILL.

Lords Amendments to be considered upon Monday next, and to be printed. [Bill 183.]

BILLS REPORTED.

ILFORD CORPORATION BILL [Lords].

Reported, with Amendments, from the Committee on Unopposed Bills (with Report on the Bill).

Bill, as amended, and Report to lie upon the Table; Report to be printed.

BATH CORPORATION BILL [Lords].

Reported, with Amendments, from the Committee on Group J of Private Bills (with Report on the Bill).

Bill, as amended, and Report to lie upon the Table; Report to be printed.

Orders of the Day — FINANCE BILL.

Considered in Committee [Progress, 30th June].

[Sir DENNIS HERBERT in the Chair.]

NEW CLAUSE.—(Charge of National Defence Contribution.)

(1) There shall be charged, on the profits arising in each chargeable accounting period falling within the live years beginning on the first day of April, nineteen hundred and thirty-seven, from any trade or business to which this Section applies, a tax (to be called the "national defence contribution") of an amount equal to five per cent. of those profits in a case where the trade or business is carried on by a body corporate and four per cent. of those profits in any other case.

(2) Subject as hereafter provided, the trades and businesses to which this Section applies are all trades or businesses of any description carried on in the United Kingdom, or carried on, whether personally or through an agent, by persons ordinarily resident in the United Kingdom.

(3) The carrying on of a profession by an individual or by individuals in partnership shall not be deemed to be the carrying on of a trade or business to which this Section applies if the profits of the profession are dependent wholly or mainly on his or their personal qualifications:

Provided that for the purpose of this subsection the expression "profession" does not include any business consisting wholly or mainly in the making of contracts on behalf of other persons or the giving to other persons of advice of a commercial nature in connection with the making of contracts.

(4) Where the functions of a company or society incorporated by or under any enactment consist wholly or mainly in the holding of investments Or other property, the holding of the investments or property shall be deemed for the purpose of this Section to be a business carried on by the company or society.

(5) This Section shall not apply to any trade or business carried on by statutory undertakers and consisting wholly or mainly in the rendering in the United Kingdom of any of the following services, namely—

(a) the supply of water, gas, electricity or hydraulic power;
(b) the provision or maintenance of a canal, harbour, dock, pier, road, bridge, ferry, or tunnel;
(c) the conservancy of a river;
(d) the carriage of goods or passengers by railway, or the carriage of passengers by road.

For the purposes of this subsection and any other provision of this Act relating to the national defence contribution—

(i) the expression "statutory undertakers" means any local or public authority

authorised by or by virtue of any enactment to render any of the services aforesaid in the United Kingdom, and any other person so authorised who is precluded by or by virtue of any enactment from charging any higher price for those services than that authorised by or by virtue of the enactment or, in the case of a body corporate, is either so precluded or precluded by or by virtue of any enactment from distributing any higher rate of dividend than that authorised by or by virtue of the enactment;
(ii) the expression "pier" means a pier wholly or mainly used for loading or unloading goods or embarking or disembarking passengers.

(6) If the Commissioners appointed for the purposes of the Special Areas (Development and Improvement) Acts, 1934 and 1937, certify that, for the purpose of inducing any persons to establish an industrial undertaking in any of the special areas, it is expedient that those persons, in addition to being provided with financial assistance under Section three of the Special Areas (Amendment) Act, 1937, should be given relief in respect of any national defence contribution which may become chargeable in respect of the profits of the undertaking, the Treasury may agree to remit the whole or any part of any national defence contribution so chargeable.

3.55 p.m.

Mr. Michael Beaumont: I beg to move, in line 22, at the end, to insert:
but this Section shall not apply to any trade or business where the profits or gains of the trade or business are computed for the purpose of Income Tax under Schedule A.
This Amendment deals with the question of taxation under the National Defence Contribution in regard to Schedule A, and with your permission, Sir Dennis, I should like the Committee to consider it in conjunction with another Amendment which deals with the same subject. I am raising this matter solely in order to obtain from the Chancellor of the Exchequer a clarification of the position of those who are taxed under Schedule A, to know who will or who will not be liable to pay the National Defence Contribution. There is no desire on my part that anybody whom the Government wish to include in this new tax should escape, but although one of the purposes of bringing in the tax in its new form was to secure simplification, it is still far from clear, from the proposals as they appear on the Paper who, if anybody, taxed under Schedule A will have to pay this new tax, and if there are any such, how they are to be assessed. Tax under Schedule A is not, in the true sense of the word, Income Tax at all; it is a property tax. It is not a tax on profits, and it is extraordinarily difficult


to assess what are the profits of an undertaking assessed under Schedule A. The number of cases which will come within the scope of this new tax is comparatively small, because these estates are not ordinarily businesses trading for profit within the meaning of these new proposals; but there are a certain number of private estates which have been turned into companies which do, in fact, make a net profit sufficiently large to bring them within the scope of these proposals; and what is not clear is how those people are to be assessed if, indeed, they will be assessed at all. It has been held that a Schedule A assessment does not come within the definition of a trade or business, but the Chancellor of the Exchequer has put down to-day a new Schedule, which appears on pages 1625 and 1626 of the Order Paper, paragraph 6 of which says that that income is exempt
which is or would he exempted from Income Tax by virtue of Section thirty-nine of the Income Tax Act, 1918, or Section thirty of the Finance Act, 1921.
Turning to the latter Act it would appear that what is referred to is Income Tax under Schedule A in respect of lands, tenements, hereditaments and heritages owned by a charity. Paragraph 6 of this new Schedule, speaking of income, also uses the words:
or would be so chargeable if the profits of the trade or business were chargeable under that Case.
Therefore, it seems to me that the new Schedule, on the one hand, exempts it, and, on the other hand, specifically includes it. What I want to know is, are any profits taxable under Schedule A subject to the National Defence Contribution, and, if so, how are they to be assessed? Schedule A is a property tax, and the actual net amount payable is very often not, assessed till four or five years after the original tax has been paid. What happens is that there is a quinquennial valuation, and for five years that assessment on the property remains. It can be subjected to certain alterations if circumstances change, but, normally speaking, that assessment is valid for five years. When you have paid your tax, supposing that your maintenance expenditure, the money spent on the property, increases, you are entitled within the next six years to make a maintenance claim, and that claim may not be, and

very often is not, settled until four or five years after the tax has been assessed. But you cannot assess profits without taking that maintenance claim into account. The claim is part of your expenditure on the property. This tax is supposed to be for five years, and personally, in common with many other Members of the Committee, I hope that that will be the full limit of its duration. That is the clearly expressed intention of the Government. But it would be most undesirable, if you are to have a tax to last for five years, that the final assessment of the last year's profits cannot be paid until 11 years hence, or six years after the tax has ended.

Mr. E. J. Williams: Is not an allowance for maintenance made before the profit is assessed?

Mr. Beaumont: The hon. Member is making the same point as I am making. The allowance is made, but it is not made until much later. Let me give an illustration. What might happen is this: Take an estate company whose taxation is assessed under Schedule A. In the year 1942, the last year of the operation of this tax, they are assessed under Schedule A. In 1948 they put in a maintenance claim which may reduce their taxable profit to a figure below the margin which brings them within the scope of the tax. Are they to pay on the original assessment? Are they to wait until a the final maintenance claim is pin before they pay at all? Or is the money, assuming that they pay and they find that they have paid too much or should not pay at all, to be refunded to them six years later? I do not mind what solution is adopted provided it is made clear what it is to be, but at present, as far as this part of this simple tax is concerned, people assessed under Schedule A do not know where they are. I have asked that the matter should be clearly explained. It may be explainable in a few words. It should be clearly laid down in the Bill and should be understanded of those who have to pay.
There are three possible alternatives. You may take the view of the Income Tax Act, 1918, and exempt properties under Schedule A. Actually, as I have said, the number of estates affected is very small. The advantage of that method is that you have already your


Income Tax definition. You may alternatively say that you will pay on the original assessment and claim a refund after your maintenance claim has been made out; or you may say that you will not pay at all until the final maintenance claim and final assessment of profits have been made. Those are the three main lines upon which you can go. I do hope that one of them will be laid down clearly. There is a fourth possibility which I hope the Government will not adopt. As the Committee know, anyone who is assessed under Schedule A has the right of choice to be assessed under Schedule D if he so prefers. I do not believe that it is the policy of the Government or the desire of the Government or the Treasury to force people to be assessed under Schedule D if they do not wish it, but if that is their policy it is better that they should say so openly. I hope that they are not going to use this method of compelling people to be assessed under Schedule D because if they are assessed under Schedule A they do not know what tax they have to pay.
It is a very intricate and technical point of Income Tax law. I am not raising it merely on my own poor abilities, for I took some trouble to make investigations. I first of all went to the Treasury, where I got an answer which struck me as palpably absurd. I then consulted the four legal advisers of the four societies dealing with the people most affected, and asked what would be the result of the new Clause, and I got four entirely different and irreconcilable answers. Whether I shall get a fifth from the Chancellor of the Exchequer to-day remains to be seen. I do not wish anyone to escape a penny of the tax which the Government want them to pay, but I do hope that the Chancellor of the Exchequer will realise that this is a serious matter and that it should be clarified. If he agrees with me that the matter is not clear now, I hope that at a later stage he will introduce Amendments to clarify it, or if I and my advisers have merely been stupid, I hope he will be able to explain the point in language sufficiently clear to bring it home even to our intellects.

4.7 p.m.

The Chancellor of the Exchequer (Sir John Simon): I am grateful to my hon.

Friend for raising this point if, as he tells us, it is a point which some persons have found obscure. I hope that in a very few sentences I shall remove some of that obscurity. If I may say so, for this purpose it really is a mistake to get ourselves all tied up with references to Schedule A. It is, I agree, a complicated Schedule in the Income Tax, but it really has nothing whatever to do with the matter in hand. I suggest that my hon. Friend should look at page 1613, where he will find the second of the Clauses we are to deal with, "Computation of profits and accounting periods." The question he asks is, how are the profits to be computed in the case of those companies which are carrying on the business, let us say, of letting blocks of residential flats or things of that kind? If my hon. Friend looks at the new Clause on page 1613, to which I have referred, he will find that it says:
For the purpose of the National Defence Contribution the profits … shall be separately computed and shall be so computed on Income Tax principles.
It says further:
For the purpose of this sub-section the expression Income Tax principles' in relation to a trade or business means the principles on which the profits arising from the trade or business are computed for the purpose of Income Tax under Case I of Schedule D, or would be so computed if Income Tax were chargeable under that case in respect of the profits so arising.
It follows from that, that you are not concerned with the machinery of Schedule A at all, but that the profits have to be assessed as though they were profits which in the case of Income Tax came under Schedule D.

Mr. Beaumont: Another assessment?

Sir J. Simon: It says that they shall be separately assessed. Therefore it is another assessment. Let me state the matter in business-like terms. You have companies owning blocks of premises, business premises or premises for private residence, like flats. We all know of them all over the country. In the first place surely it cannot be disputed that those companies which are carrying on the business of letting those premises of the class we are discussing now, come within Sub-section (4), which says:
Where the functions of a company or society incorporated … consists wholly or mainly in the holding of investments or other property …


for instance, a block of flats, that shall be deemed, for the purposes of this Clause, to be a business carried on by a company. If there is a company that owns a block of flats or chambers or business premises and carries on the business of letting them for profit, such a company is within this Clause. Are we going to tax it? The answer is that it is not to be assessed by reference to Schedule A at all, but the tax will fall upon the sum total of the full rents which it receives after subtracting all expenses. There may be a difficulty in determining what those expenses are, but that is a cause of difficulty in many cases under Income Tax, and it will be solved, of course, in the ordinary way.
I can relieve my hon. Friend's mind. He need not concern himself with the refinements of Schedule A, which has nothing to do with the matter in hand. All that happens is that you have a company which is carrying on the business of letting premises at rents for profit. It will be included under this Clause because it is regarded as carrying on a business. I think the tax could hardly be drawn in plainer terms. It says that the company shall be separately assessed and assessed on Income Tax principles, and the Clause clearly states what Income Tax principles mean. I should imagine that the authorities whom my hon. Friend consulted cannot have had their attention drawn to the passages in the Clause to which I have referred. If they will look at them again I do not think they will have any doubt about them.

4.13 p.m.

Mr. Bellenger: The explanation of the Chancellor of the Exchequer is very clear indeed, but I would ask this question. As he knows, property is generally assessed under Schedule A, but it seems to me that under Sub-section (4) of this new Clause the test will be, whether the profit is assessed under Schedule A or Schedule D, as to whether the holders of that property happen to be a company or a society incorporated. If one individual, two, three or more individuals if you like, do not form themselves into a company or a society incorporated, but nevertheless hold large properties, will they still continue to be assessed under Schedule A or will they be subject to the new tax because they will be assessed under Schedule D?

4.14 p.m.

Mr. H. G. Williams: I am afraid that the Chancellor of the Exchequer has made me more perturbed than I was before he spoke, not that this matter affects me personally. The Chancellor of the Exchequer's illustration was of a company holding a block of offices or flats. He said that their total rents would be taken into account and expenses deducted, and they would be taxed as if they came under Schedule D, Case I. Let us take the case of a man—not of a company—who has bought a block of houses, or a number of separate houses. If the Chancellor's explanation is right, he will be brought into the tax. [An HON. MEMBER: "No."] Certainly, why not? Let us look at the terms of the next Clause which deals with the computation of profits and accounting periods. It reads:
For the purpose of this Sub-section, the expression "Income Tax principles" in relation to a trade or business means the principles on which the profits arising from the trade or business are computed for the purpose of Income Tax under Case I of Schedule D, or would he so computed if Income Tax were chargeable under that Case in respect of the profits so arising.
In other words, the profits arising from the letting of houses are not considered under Schedule A, but are to be treated as though they come under Schedule D.

Sir J. Simon: I think it is a mistake to start reading the provision as to how people are to be assessed until one has mastered sufficiently Sub-section (1), as to who are to be assessed. If my hon. Friend will look at Sub-section (4) he will find:
Where the functions of a company or society incorporated by or under any enactment consist wholly or mainly in the holding of investments or other property, the holding of the investments or property shall be deemed for the purpose of this section to he a business carried on by the company or society.
It is only when you have a company which is holding property and carrying on a business of this nature that the tax will attach. The only addition I need make, for completeness, to the assertion I made as to a company which owns a block of flats or chambers and carries on a business, is the case which sometimes arises of a private landowner who turns his landholding into a private company for the purpose of carrying on the business and letting it. If he does that, the business will be taxed. There will be no


tax upon the individual owner of houses merely because he lets the houses to somebody else.

Mr. H. G. Williams: I am very grateful to the Chancellor. I would mention the case of one gentleman of my acquaintance who builds houses and sells them. He lets a number of houses also. He carries the whole thing on as one kind of business. [An HON. MEMBER: "He is a company!"] No, he is not a company. He is a builder. He does a certain amount of land speculation, and at any given time he owns a lot of houses. He treats all those activities as being part of the business in which he is engaged, and—

Whereupon the GENTLEMAN USHER OF THE BLACK ROD being come with a Message, The CFIAIRMAN left the Chair.

Mr. SPEAKER resumed the Chair.

Orders of the Day — ROYAL ASSENT.

Message to attend the Lords Commissioners.

The House went; and, having returned, Mr. SPEAKER reported the Royal Assent to:

1. Statutory Salaries Act, 1937.
2. Local Government (Members' Travelling Expenses) Act, 1937.
3. Children and Young Persons (Scotland) Act, 1937.
4. Ministers of the Crown Act, 1937.
5. Widows', Orphans' and Old Age ContributDry Pensions (Voluntary Contributors) Act, 1937.
6. Public Health (Drainage of Trade Premises) Act, 1937.
7. Glasgow Streets Sewers and Buildings Consolidation Order Confirmation Act, 1937.
8. Staffordshire County Council Act, 1937.
9. City of London (Various Powers) Act, 1937.
10. Waltham Holy Cross Urban District Council Act, 1937.
11. Sheppey Water Act, 1937.
12. London County Council (Money) Act, 1937.
13. London Midland and Scottish Railway Act, 1937.
14. Richmond (Surrey) Corporation Act, 1937.
15. Hastings Pier Act, 1937.
16. Ashdown Forest Act, 1937.

17. London and North Eastern Railway Act, 1937.
18. Newquay and District Water Act, 1937.
19. Barnet District Gas and Water Act, 1937.
20. Kingsbridge and Salcombe Water Board Act, 1937.
21. National Trust Act, 1937.
22. Taf Fechan Water Supply Act, 1937.
23. Warrington Corporation Act, 1937.

And to the following Measure passed under the provisions of the Church of England Assembly (Powers) Act, 1919:

Southwark Cathedral Measure, 1937.

Orders of the Day — FINANCE BILL.

Again considered in Committee.

[Sir DENNIS HERBERT in the Chair.]

Question again proposed, "That those words be there inserted in the proposed Clause."

4.35 p.m.

Mr. H. G. Williams: Since the interruption I have been trying to carry the matter a little further, and I think I can correctly summarise the situation in this way. Any company which owns property is going to be taxed on the total of its rents less the expenses which can be charged against it, that is, if the company is primarily engaged in holding investments or other property. The private individual who owns property, the rents of which take him above the £2,000 limit, would not be taxed apparently, unless he was also engaged in buying and selling property. I am not clear about the third class. Let us take the case of a brewery company as an example of the sort of company in which, for financial reasons, I should like to be a shareholder, though I am not. Such a company owns a lot of tied houses. Its primary business is that of buying and selling beer, but its business also to a large extent consists in the holding of investments or property in the form of public houses. I should imagine that that part of their business represents a very large proportion of the total, and that therefore a brewery company holding a number of tied houses might be taxed on the rent they received, less the expense of collecting that rent and maintaining that property, in addition to the profits


on selling beer, but it is difficult to be certain because of this difficulty of interpreting the meaning of Sub-section (4).
Apart from this case it seems to me that two other classes of property owners will be treated very differently. The man who for various reasons turns a family estate into a limited company is going to pay, but the man who does not is not going to pay, and that, I submit, is a very marked differentiation which it is difficult to justify. What is the position of a company which incidentally owns a substantial amount of property though one cannot say that its business is wholly or manly that of holding investments or other property? Will the income which they derive from their property be included as part of the profits referred to in Sub-section (1) of the Clause? I hope the Chancellor may be able to clarify these points.

4.38 p.m.

Sir J. Simon: I think my hon. Friend has used his opportunity for study to very good advantage. I really think the Committee, thanks to the contributions which have been made from several quarters, pretty well understand the matter, and I claim that though it is not, of course, pleasant to be taxed, at any rate the operation of this Clause is quite intelligible.

Mr. H. G. Williams: What about the brewery company to which I referred? Would they be brought in?

Sir J. Simon: As a matter of fact a brewery company often has so many different branches of business that it is difficult to answer that question categorically.

Mr. M. Beaumont: I do not want to press the point unduly. Like the hon. Member for South Croydon (Mr. H. G. Williams), my interval of study has clarified my appreciation of the situation under this tax, but before I ask leave to withdraw the Amendment, I want to press again on the Chancellor of the Exchequer the genuinely hard case of the estate which is turned into a private company. In point of fact, there are very few of them. It is true that they do not turn themselves into a company for the pleasure of adding the words "and Co." to their name, but because they want to get something out of it. I fully appreciate that, but in this particular case the

tax appears to be unfair in its operation. The man who has not turned his estate into a company and the man who has to carry out the same function, yet one is taxed and the other is not. I quite see the immense difficulty that there would be in exempting cases of that sort, but I hope that between now and the Report stage the Chancellor of the Exchequer will think over the matter, because it is one which I do not think will operate fairly as between owner and owner. After the discussion and the clarification which we have had from the Chancellor of the Exchequer, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

4.42 p.m.

Mr. Denman: I beg to move, as an Amendment to the proposed Clause, in line 25, after "Kingdom," to insert:
or a dominion as defined in section twenty-seven of the Finance Act, 1920.
The Committee will share my satisfaction that this Amendment raises no problems of Income Tax assessment, but, on the other hand, presents a quite simple question of policy. The Subsection which we have reached is the one under which statutory undertakers whose services are rendered wholly or mainly in the United Kingdom are exempted from National Defence Contribution, and the Amendment is to add to that list the company whose operations take place elsewhere in the British Empire. I suggest to the Committee that there is no real case for dividing up these statutory undertakings strictly in accordance with geographical location within the Empire. There are some hon. Members who would wish not to exempt these statutory undertakers at all, but I do not argue that question. My contention is that if you exempt any, there is a good case for exempting not only those who operate in the United Kingdom, but also those who operate elsewhere in the Empire. It seems to be a little hard that we should divide statutory undertakers into sheep and goats and say that those sheep who browse in comfort in home pastures shall not he taxed, but, on the other hand, that the goats who are working in stoney places outside shall be heavily fleeced. The principle underlying the exemption has been expressed several times by the Chancellor of the Exchequer. Last night he said:


The view we took was that a public utility company, or in some cases a company established which, by law, was rendering that kind of service and was by law restricted as regards the profits it distributed or the charges it made, was a class of case which ought to be exempted, because they are not free as others may be to make what profits they please or charge what they like."—[OFFICIAL REPORT, 30th June, 1937; col. 2062, vol. 325.]
That is a general principle, and I suggest that it does not matter where the company is performing its services. Whether the locality be Hammersmith or Hong Kong, the principle applies equally. No doubt my right hon. Friend will say that in logic I ought to claim exemption for companies operating in any part of the world, but there is a solid practical reason against that. We cannot expect the taxing authorities in this country to be acquainted with the minute details of foreign law, and it would be a matter of interpretation of the law whether these statutory undertakers are entitled to exemption or not. In the case, however, of the rest of our Empire, I believe that that administrative difficulty does not arise. I am assured that elsewhere in the Empire the laws under which these companies work are largely modelled on ours, or, anyhow, are very similar, and, of course, in any particular case of doubt it would always be easy to obtain the exact facts by reference to the India Office, the Dominions Office or the Colonial Office.
On the general question of policy as to what should be our attitude towards British firms carrying on such works within the Empire, my hon. Friend the Member for Altrincham (Sir E. Grigg), who, I understand, is going to support this Amendment, is far more entitled than I to speak, but I would suggest that it is the settled policy of all parties to encourage the development of our overseas territories to the best of their ability. In 1929, one of the first actions of the Labour Government was to pass a Colonial Development Act with this precise object of assisting in the development of our overseas territories. If we have that object in view, it would seem to be wrong to tax a statutory undertaking because it happens to be working outside the United Kingdom in some other part of the Empire.
There is one question to which I must refer, because it is a vital one in relation

to this proposal. Would the Amendment be a costly one? I should be the last to ask the Chancellor to accept any Amendment which would make a serious hole in the revenue of the Exchequer. It would be unfair of any of us to press on him a concession which would embarrass his financial scheme, but I suggest that this could not cause any very big loss of revenue. The different categories of businesses exempted are set out in the four paragraphs (a), (b) (c) and (d). I have not been able to find any companies owned in this country that will be affected by paragraphs (b) and (c), while, as regards paragraph (d), we all know that the great mass of the railways throughout the Empire would not, anyhow, come within the scope of National Defence Contribution. There would remain a certain number of electricity, water and gas companies operating in very various parts of the Empire, and I think there are a few Indian railways, and perhaps one or two in Africa; but anyhow I suggest that the scale of these exemptions cannot be very large, and that the Amendment would not be costly to the Exchequer.
A further reason for its acceptance is that, whatever may be the gross loss to the Exchequer, the nett loss would be substantially less, because, were these statutory undertakers exempted, such dividends as they pay to Trust companies here on their preference and ordinary shares would thereupon become liable to National Defence Contribution. Indeed, the effect of the Amendment would be to transfer the payment on such amounts from the statutory undertaker to the trust company. That class of investment is one which trust companies certainly used very frequently to hold, and there must be a substantial block of securities in such undertakings that are held by companies who would have to pay National Defence Contribution on these dividends. In consequence, the nett loss to the Exchequer would be considerably less than the gross loss. For the reasons, therefore, that the Amendment would not involve a heavy loss to the revenue, and that it would encourage the development of our overseas possessions, I submit that it is worthy of favourable consideration.

4.51 p.m.

Sir J. Simon: I have come to the conclusion that this Amendment should be accepted. In money it is really quite a


small matter. The great mass of public utility undertakings throughout the Empire would not in any case be caught by this tax; the Amendment is limited to certain enterprises which are owned here and which are actually operating under British financial control. I think the case for it is a perfectly reasonable one, it being understood, of course, that if any difficulty arose the case would have to be proved. It is not for the revenue authorities to go about and find out what is the law in South Africa, or wherever it may be; any such undertakings claiming exemption would have to prove that they are in fact restrained in the way that the Sub-section describes. I must say at once that I should find it impossible to exempt such enterprises all over the world. I know that there are such undertakings which operate through companies domiciled here in various foreign countries, but I could not undertake to include them, for the reason, among others, that, while we are in a good position to know our own Commonwealth laws, we cannot hope to do so in the case of foreign countries. I think the principle is a fair one; it is the principle of the Finance Act, 1930; and I have come to the conclusion that the Amendment should be accepted.

4.54 p.m.

Sir Edward Grigg: I am sure that all those who have put their names to this Amendment will be grateful to the Chancellor of the Exchequer for the statement he has made. I felt particularly keenly about it, because it would have its reflections to some extent on the position of native peoples for whom we are trustees. Since the Amendment is to be accepted, it is not necessary to say any more on the matter except for one point. I am told that, under the language of paragraph (i) of Sub-section (5), which refers to companies or undertakings which are limited as to the charges they make by virtue of any enactment, that phrase in its ordinary interpretation means an enactment of Parliament.

Mr. Bellenger: In view of the fact that the right hon. Gentleman is accepting this Amendment because the amount at issue is not large, can he give us some approximate idea of the figure? I should have thought that the profits of statutory undertakings in the Dominions were considerable.

4.56 p.m.

Sir J. Simon: I cannot give the figures, but I made inquiries, and received the answer which I gave to the Committee. I must point out that we are not talking about statutory undertakings in the Dominions. The number of these would be enormous. We are only talking about certain very exceptional cases, in which, although in fact the operations take place in the Dominions, what may be called the home of the undertaking is here.

Amendment agreed to.

4.57 p.m.

Captain Elliston: I beg to move, as an Amendment to the proposed Clause, in line 27, after "of," to insert "a market."
In my own constituency, as in other great centres of population, the market is a public utility of outstanding importance. By maintaining these markets the town council of Blackburn and other local authorities ensure abundant supplies of fresh food and other products, to the great advantage of the community, while at the same time the farmers, gardeners and other producers in the country for many miles round find a ready sale for their products. The authorities in question are rendering a great service by maintaining all these markets, and I hope my right hon. Friend will not require much persuasion to grant this concession. Unfortunately, I have not been able to ascertain, in the short time since I noticed this omission, whether the profits of these markets are in any way limited by enactment, but I understand that the tolls and other charges which are imposed have to be approved by the Ministry of Agriculture or the Board of Trade before they are adopted. In any case, these markets are such a boon to the people, especially in industrial centres, that I feel that they should be included in the same category as other public utilities.

4.59 p.m.

Mr. Marshall: I agree with the reasons which the hon. and gallant Member has given for urging the Chancellor to accept this Amendment. The omission appears to me to be a curious one. There are exemptions for tramways, railway undertakings, and various other statutory bodies, but these most important municipal undertakings are apparently to be


taxed. Markets are very important municipal undertakings. They get their powers, in some cases by charter, in some cases under the Public Health Acts, and in other cases by special Acts. The tolls which they can charge are governed by the Acts under which they receive their powers; they are rigidly limited; and it appears to me that, if any public utility undertaking is to be exempted at all, these markets should be the first to receive exemption. I cannot understand why they have not been included. Another reason for their exemption is that local authorities during the last two or three years have had very heavy burdens put upon them. It appears to me that, if arty semi-private statutory undertakings are to be exempt, those owned by municipal authorities should be exempt. If we get no satisfaction here, we may put a general comprehensive Amendment down for Report, but I shall be glad to hear what the Financial Secretary has to say on the matter.

5.2 p.m.

Sir Frank Sanderson: I appreciate that there are objections to the Amendment. If it were accepted, it seems to me that it might include important markets which the hon. Member had not in mind at the time he put down the Amendment. I do not suggest that anyone would think an important industrial concern like Covent Garden Market should be free from the incidence of the tax. In regard to the smaller type of markets, they are not likely to have any increased burden placed on their shoulders by the tax, because their debit and credit sides more or less balance. They do not make large profits.

5.3 p.m.

Mr. Cluse: Bordering on my constituency is the popular Caledonian Road Market. I believe it is owned by the Corporation of the City of London. The result of this tax might be that it would have to raise its tolls and fees to the general public. It is known all over the world that goods are sold at very cheap prices there, and it is a boon to the workers of North London. I hope the Chancellor of the Exchequer will remember it when he deals with the question.

5.4 p.m.

Mr. Dalton: We apprehend that there are many kinds of markets, and it may be that the Amendment is too wide either to be accepted by the Government or to meet the requirements of some of my hon. Friends. My hon. Friend the Member for Brightside (Mr. Marshall) has presented an argument which has behind it the authority of the Association of Municipal Corporations, who are much concerned at the possibility of municipal markets being subject to this tax. I think on general grounds the Chancellor of the Exchequer has not expressed the intention of taxing municipal property and undertakings. At the same time, private markets are evidently on a different footing. Might I suggest that my hon. Friend should consult with others interested in the municipal aspect of the matter and bring forward an Amendment on Report dealing specifically with municipal as distinct from private markets? My hon. Friends would hesitate very much to give support to an Amendment so wide as this, but they feel that there is a special case to be made for municipal markets, and it might help the discussion if the Chancellor would give some undertaking now that he would be willing sympathetically to consider an Amendment covering municipal markets only.

5.6 p.m.

The Financial Secretary to the Treasury (Lieut.-Colonel Colville): We have given consideration to the Amendment and have looked carefully into the matter, but we do not feel that markets can be properly classed with the kind of undertakings mentioned in the Clause, such as gas and water. The conditions under which markets are held vary very widely. Some are held under old charters, and in some cases there are special Acts which contain provisions for limited control. While this is the case in some instances, very frequently there are no restrictions at all. To accept the Amendment would be out of keeping with our intention in the Clause, which relates to public utility concerns. While I appreciate the point put by the hon. Member for Bishop Auckland (Mr. Dalton), I feel that it is not really one that we could accept, because it is not in conformity with the intentions of the Clause in relation to public undertakings.

Mr. Dalton: Do I understand that the Government simply say they will not give any further consideration to the case put by the Association of Municipal Corporations—that their mind is closed?

Lieut.-Colonel Colville: The suggestion that the hon. Gentleman now makes for the first time, that there should be a differentiation between municipal and privately-owned markets, is not one that we could accept.

5.8 p.m.

Sir Stafford Cripps: I completely fail to follow the argument that the right hon. and gallant Gentleman has put forward. He says that to exempt municipal markets would not be consonant with the spirit of the new Clause.

Lieut.-Colonel Colville: No—to exempt municipal markets and to include private markets. The Amendment was to exclude all markets, and the suggestion was made that we might differentiate between the two. It was then made for the first time. I say now that it is not one that commends itself to us.

Sir S. Cripps: Then I understand that I am wrong in saying that the reason for excluding municipal markets is that which was given with regard to markets as a whole, that is to say, that it would not be consonant with the spirit of the Clause? We have no other reason assigned as yet why municipal markets should not be excluded. One must assume that it would be consonant with the spirit of the Clause to exclude municipal markets. Does the right hon. and gallant Gentleman agree with that proposition? I want to get it quite clear. I gather that he does. I understand that he does not assign as a reason for rejecting an Amendment, if it were put down at a future stage, for excluding municipal markets, that such exclusion would not be consonant with the spirit of this Clause. That is what I first suggested and the right hon. and gallant Gentleman got up and denied it. I presume that his denial stands. There must, therefore, be some other reason, and we have not yet had any suggestion as to what that reason is. I should have thought that, when one is considering the class of utility which is set down already under Clause 5, harbour, dock, pier, road, bridge, ferry or tunnel, conservancy of a river, carriage of

goods or passengers by road, the provision of facilities for the easy distribution of goods, which is what a market is, that was no different in its character from the provision of a similar facility by means of providing a harbour or a road or a bridge or carriage by rail or road. They are all means developed by the community for the purpose of making the distribution of goods cheaper and easier for the community, and there is no essential difference in nature between a market place where the goods are sold and the roads or vehicles by which the goods are conveyed to market. They are all part of the distribution service of the community.
I quite fail to understand any argument which has so far been put forward which would disqualify a market, but would yet qualify the other similar services for exemption from this tax. Where you have municipalities, which admittedly are not going in for the provision of markets for the purpose of making profit but for the purpose of providing essential facilities to the persons in their area, surely that is the best possible reason for giving an exemption under this Clause. Unless the right hon. and gallant Gentleman can give us some better reason than he has done at present, which is no reason at all, I think we might certainly press, if not now at a later stage, the exemption of municipal markets from this taxation.

5.13 p.m.

Mr. Marshall: May I say one more word? Under this Clause docks are exempted. What difference is there between a municipal market and a dock? Docks charge tolls and rent for stalls and places where people sell their fish. A dock is not only a loading station but a wholesale market as well in many cases and yet under this Clause a place like that is exempted and a place where you can sell dead meat is going to be taxed. It is possible under the Clause even to tax cemeteries, crematoria and baths owned by local authorities—sanitary undertakings which have been established in order to improve the public health of the community. The Financial Secretary says they cannot make a distinction. I appeal to him to reconsider that decision. I support the Amendment, because it deals with one of the activities of municipal authorities. I shall certainly take an opportunity on Report of moving an Amendment to exclude all municipal statutory undertakings.

5.15 p.m.

Mr. James Griffiths: May I offer one more reason why the Government ought to reconsider this? A number of municipalities own markets which are very widely used. In many cases they are old and the capital charges have been wiped off and they are making a substantial profit. The result is that there is available at the end of the financial year of the municipal authority a sum of money which is used very substantially in the relief of rates. I presume that in such a case an authority of that kind comes under this tax, and that as a result of the imposition of the tax the surplus which usually goes to the relief of rates will now be wiped out. I am speaking of the places where there are old-established markets which make some profits, such as is the case in my own town of Llanelly and other towns of that kind. They apply those profits, perhaps amounting to 2d., 3d., 4d., or even 6d. in the £, to the relief of the rates. That is a very substantial relief in the depressed areas where the rates are high.
The operation of this clause may mean that the relief which the rates have enjoyed will now not be paid. This tax, which, it is understood, is to make sure that there will be a contribution from profits towards the cost of armaments, will in these cases become a contribution obtained from the poorest of the community. I hope that this matter will be reconsidered, and, if not, we ought to press it to-day or at some other stage. I can foresee the time when these municipalities will have to go to the Ministry of Health and say that they must have bigger grants because of the action of the Treasury in taking away some of the profits of the markets which used to go to the relief of rates.

5.17 p.m.

Sir J. Simon: The Amendment which has been moved by my hon. and gallant Friend the Member for Blackburn (Captain Elliston) simply and plainly applies to all markets, and I think that it is the general opinion of the Committee that such an Amendment, which has raised a very important and interesting discussion, really could not be accepted. My hon. and gallant Friend was thoroughly justified in pointing out how difficult it would be to bring in markets

without bringing in other municipal enterprises. I do not think that it will be possible to make a distinction between municipal enterprises of that kind, and washhouses, libraries and all sorts of things. I think that it would be very difficult to do it, but I agree that some of the considerations mentioned in the speeches but not involved in the Amendment on the Paper are subjects for investigation. I do not accept at the moment, naturally, everything that is within the impression of various hon. Members here, neither do I contradict it because I do not know. I really cannot accept the Amendment, and I do not think that the Committee would wish me to do so. I would make it quite plain that I am not giving any undertaking that it will be possible to make a modification, but in view of what has been said, the position to take up is that I will certainly consider very carefully what has been said and I will make some more inquiries. It must be clearly understood that I do not make a promise, and I think that that is the position in which the matter might reasonably be left at the present time if my hon. and gallant Friend will be good enough to withdraw the Amendment.

Mr. Dalton: As I mentioned just now, the Association of Municipal Corporations are a little disturbed about the effect of the Bill as it stands, and as the Chancellor of the Exchequer has been having consultations with many groups of people in trade and industry on the general structure of this part of the Finance Bill, will he be good enough to receive a deputation from the Association of Municipal Corporations to enable them to present their case?

Sir J. Simon: I can assure the hon. Gentleman that the Treasury know the Association of Municipal Corporations very well, and if there had been any representations from them they would have been attended to with great care. It is not necessary now to make an appointment for a deputation. We have to see what they have to say. I dare say that the Corporation of the City of London have something to say, but I do not think that we have had any communication from them, and that is one of the reasons why I do not make any observations. If the association make representations they will be very valuable in helping us to make up our minds. The form


of the tax must depend upon the representations made to me, and I hope that in the circumstances the Committee will allow this matter to go through.

Captain Elliston: In view of the statement of the Chancellor of the Exchequer, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.22 p.m.

Mr. Denman: I beg to move, as an Amendment to the proposed Clause, in line 31, at the end, to insert:
or the carriage of goods by canal or inland navigation.
This Amendment raises a very small point. As the Clause stands a canal is exempt in so far as it gets its revenue from tolls. If it obtains revenue by the carriage of goods, as one or two canal companies do, it pays tax on such revenue. Now its charges are subject to statutory limitation in the case of the carriage of goods, as in the case of tolls, and there seems no reason for treating the two classes of work differently. That is why I am moving the Amendment.

5.23 p.m.

Mr. Vyvyan Adams: I wish to support the Amendment proposed by my hon. Friend the Member for Central Leeds (Mr. Denman). We feel that it must be an oversight that canal and river undertakers have not been placed upon the same footing as railways, because the rates and charges of both railway and canal undertakers are subject to the statutory maximum. If they will read together paragraphs (b) and (d) of the Clause moved by the Chancellor of the Exchequer, where it says that the following undertakers are exempt in respect of
the provision or maintenance of a canal, harbour, dock, pier, road, bridge, ferry, or tunnel,
and
the carriage of goods or passengers by railway, or the carriage of passengers by road,
I think that the Committee will agree that it is illogical to exclude the undertakers mentioned in the Amendment of my hon. Friend. There is still, as the Committee are aware, a considerable amount of carriage of goods by inland navigation, particularly in the area with which my hon. Friend and I are most familiar. For one reason it is extremely

economical, and it would be unfair for the companies that transacted such businesses to be damnified by accident when the railways are specificially exempted.

5.24 p.m.

Lieut.-Colonel Colville: We agree that there is a case for the exemption of these undertakers. I understand that there are, in fact, very few concerns which are statutory undertakings as defined in Subsection (5), but so far as there are such undertakings, we believe that it will be in conformity with our intention in the Clause that they should be excluded from the incidence of tax, and therefore we accept the Amendment.

Amendment agreed to.

5.25 p.m.

Sir E. Grigg: I beg to move, as an Amendment to the proposed Clause, in page 36, after "Kingdom," to insert:
or a Dominion as defined in section twenty-seven of the Finance Act, 1920.
This Amendment is consequential and covered by the very welcome undertaking my right hon. Friend gave a short time ago, and I will, therefore, only ask him to make sure that the words
by virtue of any enactment
really cover enactments in any part of the Empire, and not enactments merely in this country.

5.26 p.m.

Sir J. Simon: This is consequential upon the decision at which the Committee arrived a short time ago and is merely trimming up the Clause. On the point mentioned by my hon. Friend the Member for Altrincham (Sir E. Grigg), perhaps I may be allowed to say that I have made inquiries, and I am sure that there is really no doubt at all that the Clause in the form in which we are now going to amend it, will, by the words "any enactment," cover enactments in the Empire, and would not be limited to enactments in the United Kingdom.

Amendment agreed to.

5.27 p.m.

Lieut.-Colonel Clarke: I beg to move, as an Amendment to the proposed Clause, in line 40, to leave out, "distributing any higher rate of dividend," and to insert:
paying a dividend at any higher rate, or distributing by way of dividend any greater amount.


The object of the Amendment is to ensure that every statutory gas company will be exempt from the operation of the National Defence Contribution, notwithstanding the method whereby the dividends payable by such companies are computed. We are afraid that rather more than half of the statutory undertakers will not be covered by the Clause as it stands. It will be remembered that the Acts and Orders which control the dividend payable by gas companies come under three heads. First, those who control them by the fixing of a maximum price and a maximum rate of dividend, and secondly, those who control them by the sliding scale method. Both these categories are, I think, covered, and I do not propose to go further into them, but there is the third method known generally as the basic price system, which we do not think will be covered. This basic price system is the most modern of the three. It really started to come into operation only about 1921, but at the present time it controls all the gas companies of the London area and rather more than half the output of gas in the whole of the United Kingdom. It will be remembered too that it was the subject of an inquiry by a joint committee of both Houses last autumn, and that they commented favourably upon its operation and recommended its continuance.
I think the difficulty can best be illustrated by a brief reference to the provisions that regulate the payment of dividends by these companies controlled under the basic price system. In nearly all cases, under Section 10 of the Gas Regulation Act, 1920, there is a basic price fixed for the gas and a basic dividend. That dividend is usually somewhere about 5 or 6 per cent., but if the gas is sold at a price below the basic price, a fraction, generally about one-sixth, of the benefit accruing to the consumers is allowed to be added to the dividends or may be put to reserve according as the company wishes. In addition, these companies are in most cases allowed to take money from reserve, and this can be applied to paying dividends in excess of the prescribed rate. Therefore, it is felt that it might be difficult to contend under this Clause that these companies were precluded from

distributing any particular rate of dividend. Our Amendment is designed to meet this fact. The case for the Amendment really is that the amount of money which may be distributed rather than the rate of dividend is regulated in these cases.

5.31 p.m.

Sir J. Simon: My advisers and I have looked up this matter and it appears to us that my hon. and gallant Friend is right. He has said that the words which he suggests would fit in with the more modern method of regulation. That is true. I might as well make a confession. I believe the form of words which we put into this Clause were really lifted out of the Corporation Profits Tax, and that is some time ago. The truth is that we have adopted a rather antiquated form of words, and I believe that the form of words suggested by the hon. and gallant Member is more apt for the purpose. We are not dealing with any matter of substance, but we want to make sure that the words used really do fit the modern case. Having had the matter definitely inquired into by the appropriate Department I am told that there is no doubt that there is as much ground for allowing exemption to the public utility service which is subject to limitation as regards the amount distributed in dividend, as there would be if the restriction was expressed in the terms of the rate. For these reasons it seems to me that the suggestion of the hon. and gallant Member is useful, and I suggest that we accept the Amendment.

Amendment agreed to.

5.33 p.m.

Mr. Ross Taylor: I beg to move, as an Amendment to the proposed Clause, in line 41, at the end, to insert:
and includes also any company carrying on in Scotland an undertaking for the supply of gas otherwise than under the authority of an enactment.
Non-statutory gas companies in Scotland, of which there are about 15o, mostly small in size, are in a special and unique position, and that fact has been recognised by Parliament on more than one occasion. It is by reason of that fact that they seek to be classed with statutory companies in respect of the Clause under discussion and so obtain exemption from the National Defence Contribution. In


1934, when the Gas Undertakings Act of that year was under consideration in Committee, it contained a Clause which provided that all non-statutory gas companies, save the very smallest, must within a certain time acquire statutory status. It was then represented on behalf of the Scottish non-statutory companies that by reason of the conditions under which they operated they should not be subject to the Clause in question. That contention was accepted, and by Section 35 of that Act, which deals with the application to Scotland, the non-statutory companies were excluded from the operation of Section 9 of the Act, which imposes statutory status on non-statutory companies. As far as the rest of the Act is concerned, it imposes upon the non-statutory companies various obligations which ordinarily are imposed only on statutory undertakings. The main ground for the exclusion from the operation of this Clause is to be found in the Burghs Gas Supply (Scotland) Act, 1876, Section 21, and the Local Government (Scotland) Act, 1894. It results from these two Acts that if any non-statutory gas company fails in its duty to its consumers or to the public the local authority may displace the company and become the gas authority in the district and acquire the undertaking.
Thus, while these companies to which I am referring are not subject to any statutory limitation of charge or dividend, as are statutory companies, there is none the less a very powerful compulsitor upon them to keep their charges down, and the results over a long period of years show that that compulsitor acts very effectively. They know that if they do not charge reasonably they will be taken over by the local authority, which is entitled to take them over at any time. This special position was again recognised by Parliament in the Housing (Scotland) Act, 1935. In its original form the Bill afforded certain protection to statutory undertakers in Scotland, but on representations being made the expression "statutory undertakers" was changed to "public undertakers," so as to cover the non-statutory undertakers as well. The definition in that Act of "public undertakers" makes it clear that the non-statutory companies in Scotland benefit by the protection which the other undertakings receive. The considerations which weighed with the Government in making that change in

Committee were no doubt the same that led to the amendment of the Gas Undertakings Act to which I have already referred.
In another respect non-statutory gas companies in Scotland have been placed on the same footing as statutory companies, but this time disadvantageously, because they do not get the benefits of derating under the Rating and Valuation (Apportionment) Act, 1920. Statutory companies were precluded from the benefits of derating, and the non-statutory companies were placed in the same category. They got certain other advantages similar to those enjoyed by statutory companies which have been accorded to them by reason of decisions of the Scottish courts. I submit, therefore, that there are strong reasons as well as precedents for placing these non-statutory Scottish companies in the same position as statutory companies as regards this new tax. In the full and strict sense of the term they are not statutory but by legislation and in other ways they are subjected to very much the same control as is imposed upon statutory companies. They can, of course, avoid this tax by acquiring statutory status, a procedure which is open to them at any time, but it is a costly procedure, particularly for small companies, and it seems unnecessary and even unfair that they should have to undertake that expense in order to avoid the tax.
Another point in favour of the Amendment is that the Chancellor of the Exchequer could make this concession at very small cost. The companies concerned, although they are numerous, are small. The latest information I have on the subject shows that only about 66 of the companies normally show a profit of over £2,000 per annum. In the aggregate their assessable profits would not yield to the new tax more than £7,000 per annum. On these grounds I commend the Amendment to the right hon. Gentleman and the Committee.

5.40 p.m.

Lieut.-Colonel Colville: It is true, as my hon. Friend says, that the profits made by these companies are not large, but I think that he will see that the Government would be in a difficult position if they departed from the rule which they have laid down in regard to this matter of statutory limitation. I accept


what he said that, although there is no statutory limitation, there is some compulsion on these companies to keep their prices at a reasonable level. There is, however, no statutory limitation, and it would he very difficult to depart from this guide, in framing our provisions for this tax. A gas company in Scotland, as the hon. Member says, can if it likes apply to the Board of Trade for a Special Order under the Gas Regulation Act, 1920, for the limitation of prices, and if it applied for and obtained such an Order the requirements of the Section would be fulfilled, and it would not be liable to pay the tax. The hon. Member said that that was an expensive operation. I do not think that this is a very serious objection, but it gives the power to the company to bring itself within the scope of the exemption if it so desires. I am afraid that I cannot accept the Amendment for the reason that it would mean a departure from the rule to which we must adhere, the rule of statutory limitation, as against the compulsion to which he referred. Finally, I may mention that as profits of less than £2,000 are exempted, these companies would not be required to pay a very heavy tax.

Mr. Ross Taylor: In view of what the Financial Secretary has said I beg leave to withdraw the Amendment, and I should like to say in doing so that probably the Scottish non-statutory gas companies will find it cheaper to pay the tax than to acquire statutory status by obtaining an Order.

Amendment, by leave, withdrawn.

The Chairman: I do not call the next Amendment which stands in the name of the hon. Member for Woodbridge (Mr. Ross Taylor). The hon. Member may like to know that it is quite unnecessary. With regard to the next Amendment, which stands in the name of the hon. Member for Bishop Auckland (Mr. Dalton) and the following Amendment in the name of the hon. Member for Westhoughton (Mr. Rhys Davies), and the next one, in the name of the hon. Member for Bishop Auckland, I have been in consultation with the advisers of the Chair, and have had considerable difficulty in making up my mind that these Amendments are in order. There is, however, a point of some doubt on

the subject. But it is clear that the question raised by these Amendments is one which might properly be raised on this Clause by an Amendment which would be perfectly in order if proposed in some other and different form. As there is this element of doubt about it and the subject is a proper one for discussion, I propose to stretch a point and to call these Amendments, and I make these few observations because I do not want it to be used against me as a precedent in any similar case in the future.

5.44 p.m.

Mr. Dalton: I beg to move, as an Amendment to the proposed Clause, in line 46, after "persons," to insert "to carry on or".
I am obliged to you, Sir Dennis, for your observations and for the degree of elasticity in your Ruling, and I feel sure that the Committee will entirely share your view that the subject dealt with by this and the next Amendments is one which should be discussed in relation to this tax. If it can be shown that some other form of words which you would rule to be unquestionably in order, and which would have an effect equivalent to the Amendment that we have put down—I gather that it is not your wish to make a suggestion on that point at the moment—I have no doubt that my hon. Friends who are associated with me in these Amendments would be glad to have that Amendment rather than this. For the purpose of our Amendment perhaps it is convenient that they should be taken separately and not dealt with in a general debate.

The Chairman: On that matter I am in the hands of the Committee. I think it will be necessary to discuss with this Amendment the further Amendment in the name of the hon. Member and then afterwards have a separate discussion on the Amendment in the name of the hon. Member for Westhoughton (Mr. Rhys Davies).

Mr. Dalton: The points raised by the Amendments are, of course, different. The Amendment I am moving relates to existing Special Areas as defined by law and the Amendment of the hon. Member for Westhoughton (Mr. Rhys Davies) relates to the certified areas. Hon. Members who represent constituencies in the Special Areas are deeply concerned at the


absence of any revival in these areas. It is true that there have been some geographical sub-sections of the Special Areas in which some revival in employment has taken place, but they are only sub-sections where work on armaments and kindred work has been undertaken. Over a large part of these Special Areas no appreciable revival has taken place, and in considering any proposal for the imposition of a new tax which might fall upon any undertakings in these areas it is the duty of the Committee most carefully to consider whether the imposition of further taxation would not still further prevent any revival in these areas.
The position is this: There is power already under the Special Areas Acts to the Commissioners in their own spheres to recommend certain remissions of taxation for new undertakings which are set up in the areas. The purpose of the Amendment is to give the Commissioner an additional discretion, to extend the duty he is called upon to perform, and enable him in respect of this particular impost to recommend that it shall not fall upon any existing industry which is carrying on work in a Special Area. The reason for the Amendment is simple. Any hon. Member who represents a Special Area could give the names of particular undertakings which are known to have been struggling on, many of them small undertakings and others of moderate size, but representing between them an appreciable amount of employment. They have struggled on in spite of all the depression and the exceptional burden of local rates. Unless some additional power of relief is given to the Commissioner, this tax will be imposed on the top of all the other taxes and local burdens, and it might indeed be the last straw which will break the camel's back in regard to many of these undertakings.
In terms of employment the result might be very serious in the distressed areas. In my own constituency there are a number of firms which have struggled on very gallantly in the face of great difficulties during the long period of depression. In my own, as in other constituencies, the only bright spot, from the point of view of employment, in all the surrounding gloom of unemployment, is some firm which is struggling on with a very narrow margin of profit. The falling of this tax upon them may result in shutting them down and completely

destroying all employment in these areas. We strongly press on the Government that no risk should be run, and that such activity as has maintained itself in the more depressed parts of the Special Areas should not be jeopardised by this further taxation on such undertakings. What we are asking by our Amendment is that an additional power of discretion shall be given to the Commissioner over and above the discretion he already has in regard to recommending relief from taxation under the Special Areas Amendment Act. Those who earn their living and carry on their business in the Special Areas will watch with great interest whether they are indeed to be subjected to this new impost or whether the Government will give this slight alleviation of the burdens which are pressing them down.

5.53 p.m.

Mr. J. Griffiths: I want to associate myself with what the hon. Member for Bishop Auckland (Mr. Dalton) has said. The purpose of the Amendments is to make it possible for the Commissioner to give some aid and relief from this tax to existing industries in the Special Areas. May I say in one or two words why I think it is very important? These areas are dependent on one or two main industries, the heavy industries, and there have been very little improvement in their position during the last few years. There has been no substantial improvement. What improvement there has been in the Special Areas has been confined to some selected spots and has not been generally diffused throughout them. As a matter of fact, there are some parts of the Special Areas in a worse position than they were two or three years ago. These industries, coal, iron and steel, and associated industries, give the largest amount of employment per unit of production. The newer industries which it is desired to attract, and which have been assisted, are the lighter industries, and they do not give as much employment per unit of production as the older industries.
We consider that this Amendment presents an opportunity to the Government to do something which they have not done yet for the Special Areas. Up to the moment they have touched only the fringe of the problem. While all kinds of attempts are being made to attract new industries to the areas, the old industries continue to die. This gives the Government an opportunity. The


hon. Member for. Leigh (Mr. Tinker) has been pressing the Secretary for Mines for months past to take some steps to prevent a colliery closing down, to ensure that it is kept going, because of the amount of employment it was giving in the district. It will take a lot of new industries to replace the old and heavy industries. The Commissioner may assist local authorities under the provisions of the Special Areas Act, but if a case is brought to his notice of an industry which is threatened with extinction, or a pit or factory which is going to be closed, he cannot give assistance. We suggest that if in these Special Areas there is an industry, a colliery or a factory to which this further impost will be more than it can bear, if it will be the final and decisive factor in closing it down, and they make representations to the Commissioner that if the new tax is imposed upon them they will have to close down, the Commissioner in such a case should be empowered to recommend to the Treasury, in order to keep such an industry in existence and prevent what is the only means of livelihood to the whole community having to close down, that relief should be given.

Sir Henry Fildes: If a colliery is not making a profit it would not be called upon to make this contribution.

Mr. Griffiths: That is perfectly true, but the kind of case we have in mind is that of a colliery which had had a bad time and has not paid dividends for some time past. It may have heavy charges to meet, debentures at 6 or 7 per cent. and perhaps loan charges from the banks. I am not thinking of a colliery which is making a handsome profit.

Sir H. Fildes: But all such collieries are exempt.

Mr. Griffiths: That may be, but we suggest in the Amendment that there may be cases where this power on the part of the Commissioner might save a colliery having to close down. We think this is an opportunity for the Government to do something. There is no power by which the Commissioner can keep existing industries alive and that is the first thing we should do for the Special Areas. It is impossible to wait for new industries to be established. It is because we believe that we have here a chance of enabling

the Commissioner to give some kind of relief to industries which are already in existence in the Special Areas that this Amendment has been moved, and I wish to associate myself with it.

6.1 p.m.

Sir J. Simon: I am sure that the hon. Member for Llanelly (Mr. Griffiths) appreciates, as he was reminded by my hon. Friend the Member for Dumfries (Sir H. Fildes, that if an undertaking such as he has in mind is not making profits, or if it is making gross profits and those gross profits are required for paying interest on debentures—I think he suggested even 6 per cent. or 7 per cent.——

Mr. Griffiths: In some cases.

Sir J. Simon: ——in proportion as that is so, the tax which we are discussing would not touch the colliery company, because it is expressly provided in the scheme that an undertaking may deduct all the interest it pays on debentures or loans before there is a sum to which the tax would apply. As the hon. Member knows, up to £2,000 there is no tax, and up to £12,000 there is a graduation of the tax. However, I quite understand that the general point raised by the hon. Member for Bishop Auckland (Mr. Dalton), who was supported by the hon. Member for Llanelly, is wider than that, and I will state briefly why I cannot accept the Amendment. I find it rather difficult to discuss this subject in its wider aspects, because it seems to me that it would have been much more rightly discussed as an Amendment to the Special Areas (Amendment) Act than as an Amendment to the Finance Bill. It was only last month, I believe, that the Special Areas (Amendment) Act was passed, and that Act, as the Committee will remember, gives to the Commissioner certain powers to give to various persons who contemplate starting new industries in the Special Areas relief from Income Tax, rates or rent as an inducement to them to establish new undertakings. I may not have done as much as the hon. Member for Bishop Auckland would wish, although he will recognise that it is something, but I thought that, strictly within the four corners of the new tax, I might take an opportunity of making a little further contribution by providing that this tax may also be subject to relief being given by the Commissioner. I think that is strictly


within the scope of the Finance Bill, and undoubtedly it is a welcome proposal as far as it goes.
The hon. Member for Bishop Auckland has now brought forward a new proposal, and I quite understand, and do not complain of, the general motives which inspired him to do so. The proposal is a very extraordinary one. It is that the inducement which the Commissioner may offer of being relieved from this tax in order to persuade persons to establish new industries in a Special Area should be extended so that he is also to be empowered to say to persons who are now carrying on business in the Area that, in order to induce them to continue to carry it on, he will let them off this new tax.
There are two observations I would like to make on that proposal. The first is that an inducement of relief from taxation if a person will establish an industry in the Special Areas is a form of inducement that can be worked in practice. The proof of the pudding is in the eating. It is because a new industry is set up that the person is let off the tax. If, however, one says that in order to induce a person to carry on an undertaking which he is at present carrying on, one proposes to let him off a tax, it is manifest that that inducement would not be a very easy thing to work in practice. I suppose that everybody in the area would at once proceed to say that they must have the relief if they were to carry on. I should think that it would be impossible to determine whether it really was the case that the only way to induce a person to carry on was to let him off the tax.
There is a second reason why I cannot agree to the Amendment, and I think it is a conclusive argument against the Amendment. We are not now engaged in amending the Special Areas Act. I am sure you will agree, Sir, that if we were to attempt in this discussion to amend the Special Areas legislation, it would be quite out of order. It is only a month ago that Parliament deliberately said that the Commissioner should have power to induce persons to establish new industries in the Special Areas by offering them relief from Income Tax, rates or rent. I propose that he should also have power to give relief from this new tax. The effect, if the hon. Gentleman's Amendment were adopted, would be that

although the Commissioner would be prevented by the Special Areas Act from giving relief from Income Tax, rates or rent in respect of an undertaking that is already established, in contradistinction to that, Parliament would have laid down, in the month of June, that he could let them off the National Defence Contribution, although they are already established in the area, as an inducement to them to continue to carry on their business.
The foundation of the relief which is now given is the relief which is provided for under the Special Areas Act in respect of other taxes, and if we proceed to say that we are going to begin to reform the Special Areas Act in the Finance Bill, I do not see where it would lead us. It is not possible in the Finance Bill to say that this new tax should have this peculiar quality. It is not the case in connection with the relief from Income Tax, rates or rent, relief from which is given in order to induce persons to establish new undertakings in the Special Areas; and I do not think that it is practicable to suggest that this particular form of relief is needed in order to induce an existing undertaking to continue to carry on. My proposal is an addition to the existing forms of relief, which is quite a different thing. I regret that I cannot give a different answer to the hon. Member, but I think hon. Members, whatever may be their constituencies, will see that there is a good deal of natural common sense in that position. I cannot undertake, in connection with this Bill, to enlarge the scheme of the Special Areas Act.

6.8 p.m.

Mr. Morgan Jones: I happen to have one of the trading estates in my constituency, and that trading estate naturally consists of a certain number of enterprises which would be able to avail themselves of the benefits provided by the Special Areas Act. I want to ask the right hon. Gentleman what is the effect of the Government's proposal, because it says that the commissioner shall consider whether, for the purpose of inducing any persons to establish an industrial undertaking in any of the Special Areas, it is expedient that those persons should be given relief in respect of the National Defence Contribution. Does that mean that hereafter they will get this benefit?


Some of these concerns have already been established, and I believe that one has actually been started to-day. Would those concerns he entitled to get this extra benefit, or would it be confined to concerns that might be induced into the area hereafter?

6.10 p.m.

Sir J. Simon: That point occurred to me when I looked at the Clause, and I realise that the present Bill will not become law for some three or four weeks. The question put by the hon. Member is whether new enterprises which are just coming into the area will be just too early to benefit from the inducement which we offer. I have made tentative inquiries about this, and I think I can assure the hon. Member that the relations between the Treasury and the Commissioner in respect of those cases are such that I do not think particular sort of instance that he mentioned would arise. I have considered whether we ought to put in some words to cover that, but I am told that in all these cases there are discussions and negotiations, and I think that in the sort of instance that he mentioned there world not, in fact, be any objection raised to adding this benefit to those which are already being offered, in connection with an enterprise which is just becoming established.

6.12 p.m.

Mr. Attlee: I was approached not long ago by a firm which wanted to start in the Special Areas, and the whole question was whether it could avail itself of the provisions of the Special Areas Act. The effect of including in the Act words which said that the benefit was to apply to undertakings that were to be established in the Special Areas was to hold up the whole work of getting the business going, because the person could not get his money and could not get the undertaking started at the time he wanted because he had to wait until he came within the category of these undertakings. I suggest that the same thing will happen here. If there is a business that wants to start in the Special Areas, it will have to wait at least four weeks until this Bill becomes law. I do not see why a definite date should not be inserted in the Bill to make it clear. It does not seem to me to be very sound to leave this matter to administrative action. Would it not

be better to insert some words making it quite clear that firms setting up now will receive the benefit under this Bill?

Sir J. Simon: The right hon. Gentleman began by giving as an illustration a point which arose under the administration of the Special Areas Act. I can only repeat that I made an inquiry about this, as I appreciated the sort of point which the Leader of the Opposition has put. In view of the fact that it always takes a little time, as there are discussions and negotiations, I was assured that there would not in practice be any delay or obstacle, such as the hon. Gentleman said did arise in one case under the Special Areas Act. I see the importance of this, because one does not want to make people better off by asking them to delay. I will gladly make inquiries again, but I believe that this is one of the cases where the thing works out right as long as there is a clear understanding as to what we intend. I think, if the right hon. Gentleman will allow me to look into it, that would be better than if I were to make another statement at this stage.

6.15 p.m.

Mr. Dalton: There will be great disappointment in the Special Areas at the very cold reception which the Chancellor of the Exchequer has given to this Amendment. I do not wish to take up the time in rearguing the case, but, frankly, I am not convinced, nor are my hon. Friends convinced, that the gift of this additional discretion to the Commissioner would not be valuable, from the point of view of maintaining employment in those areas. May I give one illustration? Surely the Commissioner ought to be able to make inquiries in relation to an established business and to find out what are the prospects of that business continuing to maintain itself and to provide a certain amount of employment, say, for 500 men or 1,000 men, or whatever the number might be. The Commissioner might as a result of such inquiry be satisfied that the concern would have great difficulty in maintaining that scale of employment. On the other hand, if a slight relief were given it might make all the difference in regard to the concern, either having to close down altogether or discharge a certain number of its employés. We are not at all satisfied that this proposal has been viewed in a sympathetic or imaginative spirit,


and, therefore, particularly on behalf of the unfortunate population of the distressed areas who have so little to thank the Government for, we shall carry the Amendment to a Division.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 131; Noes, 195.

Division No. 249.]
AYES.
[6.16 p.m.


Acland, R. T. D. (Barnstaple)
Hall, J. H. (Whitechapel)
Oliver, G. H.


Adams, D. M. (Poplar, S.)
Harris, Sir P. A.
Paling, W.


Adamson, W. M.
Henderson, A. (Kingswinford)
Parker, J.


Ammon, C. G.
Henderson, J. (Ardwick)
Parkinson, J. A.


Attlee, Rt. Hon. C. R.
Henderson, T. (Tradeston)
Pethick-Lawrence, Rt. Hon. F. W.


Banfield, J. W.
Hills, A. (Pontefract)
Price, M. P.


Barr, J.
Holdsworth, H.
Pritt, D. N.


Batey, J.
Hollins, A.
Quibell, D. J. K.


Bellenger, F. J.
Hopkin, D.
Ridley, G.


Benn, Rt. Hon. W. W.
Jagger, J.
Riley, B.


Broad, F. A.
Jenkins, A. (Pontypool)
Ritson, J.


Brown, C. (Mansfield)
Jenkins, Sir W. (Neath)
Robinson, W. A. (St. Helens)


Brown, Rt. Hon. J. (S. Ayrshire)
John, W.
Rowson, G.


Burke, W. A.
Jones, A. C. (Shipley)
Salter, Dr. A. (Bermondsey)


Chater, D.
Jones, J. J. (Silvertown)
Sanders, W. S.


Cluse, W. S.
Jones, Morgan (Caerphilly)
Seely, Sir H. M.


Clynes, Rt. Hon. J. R.
Kelly, W. T.
Sexton, T. M.


Cocks, F. S.
Kennedy, Rt. Hon. T.
Silkin, L.


Cove, W. G.
Kirby, B. V.
Simpson, F. B.


Cripps, Hon. Sir Stafford
Kirkwood, D.
Sinclair, Rt. Hon. Sir A. (C'thn's)


Daggar, G.
Lansbury, Rt. Hon. G
Smith, E. (Stoke)


Dalton, H.
Lathan, G.
Smith, Rt. Hon. H. B. Lees- (K'ly)


Davidson, J. J. (Maryhill)
Lawson, J. J.
Smith, T. (Normanton)


Davies, R. J. (Westhoughton)
Leach, W.
Sorensen, R. W.


Davies, S. O. (Merthyr)
Lee, F.
Stewart, W. J. (H'ght'n-la-Sp'ng)


Dobbie, W.
Leonard, W.
Strauss, G. R. (Lambeth, N.)


Dunn, E. (Rother Valley)
Leslie, J. R.
Taylor, R. J. (Morpeth)


Ede, J. C.
Lunn, W.
Thorne, W.


Edwards, Sir C. (Bedwellty)
Macdonald, G. (Ince)
Thurtle, E.


Fletcher, Lt.-Comdr. R. T. H.
McEntee, V. La T.
Tinker, J. J.


Foot, D. M.
McGhee, H. G.
Viant, S. P.


Gallacher, W.
MacLaren, A.
Walker, J.


Gardner, B. W.
Maclean, N.
Watkins, F. C.


Garro Jones, G. M.
MacMillan, M. (Western Isles)
Watson, W. McL.


George, Major G. Lloyd (Pembroke)
MacNeill, Weir, L.
Wedgwood, Rt. Hon. J. C.


George, Megan Lloyd (Anglesey)
Mainwaring, W. H.
Welsh, J. C.


Gibson, R. (Greenock)
Mander, G. le M.
Westwood, J.


Graham, D. M. (Hamilton)
Marshall, F.
Wilkinson, Ellen


Green, W. H. (Deptford)
Mathers, G.
Williams, T. (Don Valley)


Greenwood, Rt. Hon. A.
Messer, F.
Woods, G. S. (Finsbury)


Grenfell, D. R.
Milner, Major J.
Young, Sir R. (Newton)


Griffiths, G. A. (Hemsworth)
Montague, F.



Griffiths, J. (Llanelly)
Morrison, Rt. Hon. H. (Hackney, S.)
TELLERS FOR THE AYES.


Groves, T. E.
Morrison, R. C. (Tottenham, N.)
Mr. Whiteley and Mr. Charleton.


Hall, G. H. (Aberdare)
Naylor, T. E.





NOES.


Acland-Troyte, Lt.-Col. G. J.
Carver, Major W. H.
Donner, P. W.


Agnew, Lieut.-Comdr. P. G.
Cazalet, Thelma (Islington, E.)
Drewe, C.


Albery, Sir Irving
Cazalet, Capt. V. A. (Chippenham)
Duckworth, w. R. (Moss Side)


Anstruther-Gray, W. J.
Chamberlain, Rt. Hn. N. (Edgb't'n)
Dugdale, Captain T. L.


Aske, Sir R. W.
Channon, H.
Duggan, H. J.


Astor, Hon. W. W. (Fulham, E.)
Chorlton, A. E. L.
Duncan, J. A. L.


Balfour, G. (Hampstead)
Christie, J. A.
Dunglass, Lord


Balniel, Lord
Clarke, Lt.-Col. R. S. (E. Grinstead)
Elliot, Rt. Hon. W. E.


Beaumont, M. W. (Aylesbury)
Clarry, Sir Reginald
Ellis, Sir G.


Beaumont, Hon. R. E. B. (Portsm'h)
Cobb, Captain E. C. (Preston)
Elmley, Viscount



Colville, Lt.-Col. Rt. Hon. D. J.
Emrys-Evans, P. V.


Bennett, Sir E. N.
Conant, Captain R. J. E.
Entwistle, Sir C. F.


Bernays, R. H.
Cooke, J. D. (Hammersmith, S.)
Evans, D. O. (Cardigan)


Blair, Sir R.
Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Everard, W. L.


Boothby, R. J. G.
Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Fildes, Sir H.


Bossom, A. C.
Courthope, Col. Rt. Hon. Sir G. L.
Furness, S. N.


Boyce, H. Leslie
Cox, H. B. T.
Gluckstein, L. H.


Bracken, B.
Croft, Brig.-Gen. Sir H. Page
Goodman, Cot. A. W.


Brass, Sir W.
Crooke, J. S.
Gower, Sir R. V.


Briscoe, Capt. R. G.
Crookshank, Capt. H. F. C.
Grant-Ferris, R.


Brocklebank, Sir Edmund
Crossley, A. C.
Granville, E. L.


Brown, Brig.-Gen. H. C. (Newbury)
Crowder, J. F. E.
Gretton, Col. Rt. Hon, J.


Bull, B. B.
Cruddas, Col. B.
Grigg, Sir E. W. M.


Burton, Col. H. W.
Dawson, Sir P.
Grimston, R. V.


Butcher, H. W.
Denman, Hon. R. D.
Guest, Lieut.-Colonel H. (Drake)


Butler, R. A.
Denville, Alfred
Gunston, Capt. D. W.




Hacking, Rt. Hon. D. H.
Mayhew, Lt.-Col. J.
Smith, L. W. (Hallam)


Hannah, I. C.
Mellor, Sir J. S. P. (Tamworth)
Smith, Sir R. W. (Aberdeen)


Hannon, Sir P. J, H
Mills, Sir F. (Leyton, E.)
Somervell, Sir D. B. (Crewe)


Harvey, Sir G.
Mills, Major J. D. (New Forest)
Somerville, A. A. (Windsor)


Haslam, Sir J. (Bolton)
Moreing, A. C.
Southby, Commander Sir A. R. J.


Hellgers, Captain F. F. A.
Morgan, R. H.
Spears, Brigadier-General E. L.


Heneage, Lieut.-Colonel A. P
Morrison, G. A. (Scottish Univ's.)
Stanley, Rt. Hon. Oliver (W'm'l'd)


Hepburn, P. G. T. Buchan-
Morrison, Rt. Hon. W. S. (Cirencester)
Storey, S.


Hepworth, J.
Munro, P.
Strauss, H. G. (Norwich)


Higgs, W. F.
Neven-Spence, Major B. H. H.
Strickland, Captain W. F.


Hills, Major Rt. Hon J. W. (Ripon)
Nicholson, G. (Farnham)
Stuart, Hon. J. (Moray and Nairn)


Hoare, Rt. Hon. Sir S.
O'Connor, Sir Terence J.
Sueter, Rear-Admiral Sir M. F.


Hope, Captain Hon. A. O. J.
O'Neill, Rt. Hon. Sir Hugh
Sutcliffe, H.


Horsbrugh, Florence
Patrick, C. M.
Tasker, Sir R. I.


Hudson, Capt. A. U. M. (Hack., N.)
Peake, O.
Tate, Mavis C.


Hume, Sir G. H.
Peat, C. U.
Taylor, C. S. (Eastbourne)


Hunter, T.
Peters, Dr. S. J.
Thomson, Sir J. D. W.


Hutchinson, G. C.
Pickthorn, K. W. M.
Titchfield, Marquess of


Keeling, E. H.
Ponsonby, Col. C. E.
Touche, G. C.


Kerr, J. Graham (Scottish Univs.)
Pownall, Lt.-Col. Sir Assheton
Train, Sir J.


Lamb, Sir J. Q.
Procter, Major H. A.
Tufnell, Lieut.-Commander R. L.


Lambert, Rt. Hon. G.
Radford, E. A.
Turton, R. H.


Law, R. K. (Hull, S.W.)
Raikes, H. V. A. M.
Wakefield, W. W.


Lees-Jones, J.
Reid, Sir D. D. (Down)
Wallace, Capt. Rt. Hon. Euan


Leighton, Major B. E. P.
Reid, J. S. C. (Hillhead)
Ward, Lieut.-Col. Sir A. L. (Hull)


Liddall, W. S.
Reid, W. Allan (Derby)
Warrender, Sir V.


Little, Sir E. Graham-
Rickards, G. W. (Skipton)
Waterhouse, Captain C.


Llewellin, Lieut.-Col, J. J.
Robinson, J. R. (Blackpool)
Watt, G. S. H.


Lloyd, G. W.
Ropner, Colonel L.
Wayland, Sir W. A


Loftus, P. C.
Ross Taylor, W. (Woodbridge)
Wedderburn, H. J. S.


Lovat-Fraser, J. A.
Rowlands, G.
Williams, H. G. (Croydon, S.)


Mabane, W. (Huddersfield)
Russell, S. H. M. (Darwen)
Windsor-Clive, Lieut.-Colonel G.


MacAndrew, Colonel Sir C. G.
Salmon, Sir I.
Withers, Sir J. J.


McEwen, Capt. J. H. F.
Samuel, M. R. A.
Womersley, Sir W. J.


Macquisten, F. A.
Sassoon, Rt. Hon. Sir P.
Wright, Squadron-Leader J. A. C.


Magnay, T.
Savery, Sir Servington
Young, A. S. L. (Partick)


Maitland, A.
Selley, H. R.



Makins, Brig.-Gen. E.
Shakespeare, G. H.
TELLERS FOR THE NOES.—


Manningham-Buller, Sir M.
Shaw, Major P. S. (Wavertree)
Major Sir George Davies and Mr.


Margesson, Capt. Rt. Hon. H. D. R.
Shaw, Captain W. T. (Forfar)
Cross.


Markham, S. F.
Simon, Rt. Hon. Sir J. A.

The Deputy - Chairman (Captain Bourne): Before calling on the hon. Member for Westhoughton (Mr. Rhys Davies) to move the next Amendment on the Paper, I ought to inform him that in the case of this Amendment also there was considerable doubt as to whether it is in order or not, but in accordance with what has already been said from the Chair I am allowing him the benefit of the doubt.

6.27 p.m.

Mr. Rhys Davies: I beg to move, as an Amendment to the proposed Clause, in line 47, after "areas" to insert:
or in any area to which section five of the Special Areas (Amendment) Act, 1937, applies.
It is not the first time, Captain Bourne, that I have enjoyed the benefit of the doubt, and I hope to show that the Amendment is one that ought to be accepted. I would also point out that it is to be taken in conjunction with the next Amendment on the Paper—in line 47 to leave out from "persons" to "should," in line 49. I am sorry that the Chancellor of the Exchequer is not here at the moment. I

worked with the right hon. Gentleman on the Factories Bill in Committee upstairs when he was Home Secretary and we were able to wring a few concessions out of him during those proceedings. I shall be very disappointed therefore if we do not succeed in getting some concession upon this Amendment. The last part of the Clause which we are now discussing must be read in conjunction with the provisions of the Special Areas (Amendment) Act, 1937. Section 3 of that Act provides for financial assistance being given to new undertakings in the Special Areas. The Clause of the Finance Bill which we are now considering gives certain relief to undertakings in the Special Areas, in respect of the National Defence Contribution.
We cannot understand why the Government, in any relief which they propose for the Special Areas, always neglect the other distressed areas which are in a far worse plight than those scheduled as Special. I have been asked to move this Amendment because the district which I have the honour to represent is actually in a worse plight than most of the districts which are scheduled as Special Areas. The official returns of unemployment showed


that the percentage of unemployment among males in the township of Hindley with 26,000 inhabitants, is higher than that of any town in the county of Durham. How comes it therefore that the Government in their treatment of the distressed areas problem, always give certain advantages to the scheduled areas but leave out of account altogether the distressed areas that are not scheduled? We failed to establish the principle of equality in this connection when the Special Areas Act was under consideration. We wanted to bring all the distressed areas within the ambit of that Measure so that they would all be treated alike and so that any benefits accruing to the Special Areas so-called, would extend to all distressed areas some of which though not scheduled properly belong to the same category.
Our complaint, therefore, is that after failing to secure equality under that Measure, a distinction is once again being made to the disadvantage of those distressed areas which are not scheduled in the original Measure. I am, of course, asking for this relief from the point of view of securing work for our people. Under this proposal the National Defence Contribution is not to be imposed on firms that are induced to go to the Special Areas, but firms that are induced to come into my distressed area, which is in a worse plight than most of the Special Areas, are not to get any relief at all. I cannot understand the mentality of the Government. Their attitude is, that having scheduled the Special Areas six or seven years ago, they are to remain Special for all eternity. There are patches of Lancashire in a terrible situation, and if one penny of relief is to be given to any firm that can find work to the people who are in distress, it ought to be done for those Lancashire districts as much as for Durham, Northumberland and Wales.
If we allowed this to pass—the second occasion in 1937—when a distinction is being made against those areas outside the Special Areas, I suppose the Government will continue their policy and we shall have in the end patches of this country that are in a terrible condition suffering under the great injustice that the Government do not think they ought to receive attention of any kind. I know that some people will ask, "Why do the Socialists want to secure relief for the

capitalists?" While I see men who for o long years have been without any income but public relief and unemployment assistance, I will do almost anything to get them out of their distress. What we are trying to do now is not very much; but every time we can raise our voices in favour of getting these men some work to do and to prevent their spirit being broken by unemployment and poverty, we shall do it.

6.34 p.m.

The Attorney-General (Sir Donald Somervell): I also, like the hon. Member for Westhoughton (Mr. Rhys Davies), have the benefit of the doubt. I have not a great deal to add to the general argument of my right hon. Friend the Chancellor of the Exchequer on the earlier Amendment. The hon. Gentleman has complained that the Government, having fixed the schedule of Special Areas six or seven years ago, were proceeding on the basis that the schedule is final and not subject to extension or change. As he reminded the Committee, however, in the Act which we passed a short time ago there was an extension of the relief to be granted to the certified areas. He and his friends challenged the Government's policy at that time and said that those areas should be in all respects on an equality with the Special Areas. That suggestion was not accepted by the House. This new Clause, therefore, has to be considered, as my right hon. Friend said, in the light of the decision taken by the House in the Special Areas Act of this year.
So far as the certified areas are concerned, there is no power to give relief in respect of Income Tax by way of inducement to new industrial undertakings that come into them. The form of assistance in respect of certified areas is assistance to a site company by way of a loan. That is the form of assistance that Parliament has decided shall be given in the certified areas. If this Amendment were accepted, it would bring into existence a new form of assistance to the certified areas in addition to that which Parliament decided should be the form a few weeks ago. If I may relate the argument to the last Amendment which we had to consider, that dealt with the case of industrial undertakings being induced to come into a Special Area. Under the Special Areas Act the Commissioners are given power


to give relief in respect of rates, rent and Income Tax, was wholly in accordance with that principle—and it would have been illogical if we had not done it—that having said they might be given that relief we said that they should be given relief in respect of National Defence Contribution.
Parliament having decided that in the case of certified areas the inducement should take the form, not of relief in respect of other charges, but of financial assistance to a site company, it would be outside the principle of this Bill and these Clauses to give a form of assistance by way of relief from taxation, which was the form negatived by Parliament in the Special Areas Act. I am sure that hon. Gentlemen opposite approach this question with a complete sense of reality, and I would point out that if the basis of the Special Areas Act is not inducement in regard to certified areas by way of relief from taxation, it cannot be suggested that this Amendment would effect the object of hon. Gentlemen and what every one has at heart, namely, to induce enterprises to go to those areas that might not otherwise go.

If an enterprise contemplates going to one of the certified areas, can anybody really suggest that it would be deterred from going by the mere fact that, if it makes profits of over £2,000, it will have to pay with everybody else the 5 per cent. National Defence Contribution, the position being that it would have to face the fact that it would have to pay ordinary rent, rates and Income Tax? The only extra inducement that would be afforded if the Amendment were carried is that in the event of profits exceeding £2,000, it would escape the National Defence Contribution. When one looks at it from that point of view, one sees that the Amendment would not effect any of the objects which the hon. Member has in mind, for no enterprise would be deterred by the absence of this Amendment. It would also be outside the scope of this Clause, and for the reasons which the Chancellor of the Exchequer elaborated on the last Amendment I suggest that the Amendment cannot be accepted.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 129; Noes, 192.

Division No. 250.]
AYES.
[6.41 p.m.


Adams, D. M. (Poplar, S.)
Grenfell, D. R.
Mainwaring, W. H.


Adamson, W. M.
Griffiths, G. A. (Hemsworth)
Marshall, F.


Alexander, Rt. Hon. A. V. (H'lsbr.)
Griffiths, J. (Llanelly)
Messer, F.


Ammon, C. G.
Groves, T. E.
Milner, Major J.


Attlee, Rt. Hon. C. R.
Hall, G. H. (Aberdare)
Montague, F.


Banfield, J. W.
Hall, J. H. (Whitechapel)
Morrison, Rt. Hon. H. (Hackney, S.)


Barr, J.
Harris, Sir P. A.
Morrison, R. C. (Tottenham, N.)


Bellenger, F. J.
Henderson, J. (Ardwick)
Naylor, T. E.


Benn, Rt. Hon. W. W.
Henderson, T. (Tradeston)
Noel-Baker, P. J.


Broad, F. A.
Hills, A. (Pontefract)
Oliver, G. H.


Brown, C. (Mansfield)
Holdsworth, H.
Paling, W.


Brown, Rt. Hon. J. (S. Ayrshire)
Hollins, A.
Parker, J.


Burke, W. A.
Hopkin, D.
Parkinson, J. A.


Cape, T.
Jagger, J.
Pethick-Lawrence, Rt. Han. F. W.


Chater D.
Jenkins, A. (Pontypool)
Price, M. P.


Cluse, W. S.
Jenkins, Sir W. (Neath)
Pritt, D. N.


Clynes, Rt. Hon. J. R.
John, W.
Quibell, D. J. K.


Cocks, F. S.
Jones, A. C. (Shipley)
Ridley, G.


Cove, W. G.
Jones, J. J. (Silvertown)
Riley, B.


Cripps, Hon. Sir Stafford
Jones, Morgan (Caerphilly)
Ritson, J.


Daggar, G.
Kelly, W. T.
Robinson, W. A. (St. Helens)


Dalton, H.
Kennedy, Rt. Hon. T.
Rowson, G.


Davidson, J. J. (Maryhill)
Kirby, B. V.
Salter, Dr. A. (Bermondsey)


Davies, R. J. (Westhoughton)
Kirkwood, D.
Sanders, W. S.


Davies, S. O. (Merthyr)
Lansbury, Rt. Hon. G.
Seely, Sir H. M.


Dobbie, W.
Lathan, G.
Sexton, T. M.


Dunn, E. (Rother Valley)
Lawson, J. J.
Silkin, L.


Ede, J. C.
Leach, W.
Simpson, F. B.


Edwards, Sir C. (Bedwellty)
Lee, F.
Sinclair, Rt. Hon. Sir A. (C'thn's)


Fletcher, Lt.-Comdr. R. T. H.
Leonard, W.
Smith, E. (Stoke)


Foot, D. M.
Leslie, J. R.
Smith, Rt. Hon. H. B. Lees- (K'ly)


Gardner, B. W.
Lunn, W.
Smith, T. (Normanton)


Garro Jones, G. M.
Macdonald, G. (Ince)
Sorensen, R. W.


George, Major G. Lloyd (Pembroke)
McEntee, V. La T.
Stewart, W. J. (H'ght'n-le-Sp'ng)


George, Megan Lloyd (Anglesey)
McGhee, H. G.
Strauss, G. R. (Lambeth, N.)


Gibson, R. (Greenock)
MacLaran, A.
Taylor, R. J. (Morpeth)


Graham, D. M. (Hamilton)
Maclean, N.
Thorne, W.


Green, W. H. (Deptford)
MacMillan, M. (Western Isles)
Thurtle, E.


Greenwood, Rt. Hon. A.
MacNeill, Weir. L.
Tinker, J. J.




Viant, S. P.
Welsh, J. C.
Woods, G. S. (Finsbury)


Walkden, A. G.
Westwood, J.
Young, Sir R. (Newton)


Walker, J.
Whiteley, W. (Blaydon)



Watkins, F. C.
Wilkinson, Ellen
TELLERS FOR THE AYES.—


Watson, W. McL.
Williams, T. (Don Valley)
Mr. Charleton and Mr. Mathers.




NOES


Acland-Troyte, Lt.-Col. G. J.
Goodman, Col. A. W.
Pownall, Lt.-Col. Sir Astheton


Agnew, Lieut.-Comdr. P. G.
Gower, Sir R. V.
Procter, Major H. A.


Albery, Sir Irving
Grant-Ferris, R.
Radford, E. A.


Anstruther-Gray, W. J.
Granville, E. L.
Raikes, H. V. A. M.


Aske, Sir R. W.
Gretton, Col. Rt. Hon, J.
Reid, Sir D. D. (Down)


Astor, Han. W. W. (Fulham, E.)
Grimston, R. V.
Reid, J. S. C. (Hillhead)


Balfour, G. (Hampsteas)
Guest, Lieut.-Colonel H. (Drake)
Reid, W. Allan (Derby)


Balniel, Lord
Gunston, Capt. D. W.
Richards, G. W. (Skipton)


Beaumont, Hon. R. E. B. (Porlsm'h)
Hacking, Rt. Hon. D. H.
Robinson, J. R. (Blackpool)


Bennett, Sir E, N.
Hannah, I. C.
Ropner, Colonel L.


Boothby, R. J. C.
Hannon, Sir P. J. H.
Ross Taylor, W. (Woodbridge)


Boyce, H. Leslie
Harvey, Sir G.
Rowlands, G.


Bracken, B.
Haslam, Sir J. (Bolton)
Russell, S. H. M. (Darwen)


Brass, Sir W.
Heilgers, Captain F. F. A.
Salmon, Sir I.


Briscoe, Capt. R. G.
Heneage, Lieut.-Colonel A. P.
Samuel, M. R. A.


Brocklebank, Sir Edmund
Hepburn, P. G. T. Buchan-
Sassoon, Rt. Hon. Sir P.


Brown, Rt. Hon. E. (Leith)
Hepworth, J.
Savery, Sir Servington


Brown, Brig.-Gen. H. C. (Newbury)
Higgs, W. F.
Selley, H. R.


Bull, B. B.
Hills, Major Rt. Hon. J. W. (Ripon)
Shakespeare, G. H.


Burton, Col. H. W.
Hoare, Rt. Hon. Sir S.
Shaw, Major P. S. (Wavertree)


Butcher, H. W.
Hope, Captain Hon. A. O. J.
Shaw, Captain W. T. (Forfar)


Butler, R. A.
Horsbrugh, Florence
Simon, Rt. Hon. Sir J. A.


Carver, Major W. H.
Hudson, Capt. A. U. M. (Hack., N.)
Smith, L. W. (Hallam)


Cazalet, Thelma (Islington, E.)
Hudson, R. S. (Southport)
Smith, Sir R. W. (Aberdeen)


Cazalet, Capt. V. A. (Chippenham)
Hume, Sir G. H.
Somervell. Sir D. B. (Crewe)


Chamberlain, Rt. Hn. N. (Edgb't'n)
Hunter, T.
Somerville, A. A. (Windsor)


Chorlton, A. E. L.
Hutchinson, G. C.
Southby, Commander Sir A. R. J.


Clarke, Lt.-Col. R. S. (E. Grinstead)
Keeling, E. H.
Spears, Brigadier-General E. L.


Clarry, Sir Reginald
Kerr, J. Graham (Scottish Univs.)
Spens, W. P.


Cobb, Captain E. C. (Preston)
Lamb, Sir J. Q.
Stanley, Rt. Hon. Oliver (W'm'l'd)


Colville, Lt.-Col. Rt. Hon. D. J.
Lambert, Rt. Hon. G.
Storey, S.


Conant, Captain R. J. E.
Law, R. K. (Hull, S.W.)
Strauss, H. G. (Norwich)


Cook, Sir T. R. A. M. (Norfolk, N.)
Leckie, J. A.
Strickland, Captain W. F.


Cooke, J. D. (Hammersmith, S.)
Lees-Jones, J.
Stuart, Hon. J. (Moray and Nairn)


Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Leighton, Major B. E. P.
Sueter, Rear-Admiral Sir M. F.


Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Liddall, W. S.
Sutcliffe, H.


Courthope, Col. Rt. Hon. Sir G. L.
Little, Sir E. Graham-
Tasker, Sir R. I.


Cox, H. B. T.
Llewellin, Lieut.-Col. J. J.
Tate, Mavis C.


Croft, Brig.-Gen. Sir H. Page
Lloyd, G. W.
Taylor, C. S. (Eastbourne)


Crooke, J. S.
Loftus, P. C.
Thomas, J. P. L.


Crookshank, Capt. H. F. C.
Lovat-Fraser, J. A.
Thomson, Sir J. D. W.


Crossley, A. C.
Mabane, W. (Huddersfield)
Titchfield, Marquess of


Crowder, J. F. E.
MacAndrew, Colonel Sir C. G.
Touche, G. C.


Cruddas, Col. B.
McEwen, Capt. J. H. F.
Train, Sir J.


Davies, Major Sir G. F. (Yeovil)
Macquisten, F. A.
Tree, A. R. L. F.


Dawson, Sir P.
Magnay, T.
Tufnell, Lieut.-Commander R. L.


Denman, Hon. R. D.
Makins, Brig.-Gen. E.
Turton, R. H.


Denville, Alfred
Manningham-Buller, Sir M.
Wakefield, W. W.


Donner, P. W.
Margesson, Capt- Rt. Hon. H. D. R.
Walker-Smith, Sir J.


Drewe, C.
Markham, S. F.
Wallace, Capt. Rt. Hon. Euan


Duckworth, W. R. (Moss Side)
Mayhew, Lt.-Col. J.
Ward, Lieut.-Col. Sir A. L. (Hull)


Dugdale, Captain T. L.
Mellor, Sir J. S. P. (Tamworth)
Warrender, Sir V.


Duggan, H. J.
Mills, Sir F. (Leyton, E.)
Waterhouse, Captain C.


Duncan, J. A. L.
Mills, Major J. D. (New Forest)
Watt, G. S. H.


Dunglass, Lord
Moreing, A. C.
Wayland, Sir W. A


Elliot, Rt. Hon. W. E.
Morgan, R. H.
Wedderburn, H. J. S.


Ellis, Sir G.
Morrison, G. A. (Scottish Univ's.)
Williams, H. G. (Croydon, S.)


Elmley, Viscount
Morrison, Rt. Hon. W. S. (Cirencester)
Windsor-Clive, Lieut.-Colonel G.


Emrys-Evans, P. V.
Nicholson, G. (Farnham)
Withers, Sir J. J.


Entwistle, Sir C. F.
O'Neill, Rt. Hon. Sir Hugh
Womersley, Sir W. J.


Evans, D. O. (Cardigan)
Peake, O.
Wright, Squadron-Leader J. A. C.


Everard, W. L.
Peat, C. U.
Young, A. S. L. (Partick)


Fildes, Sir H.
Peters, Dr. S. J.



Furness, S. N.
Pickthorn, K. W. M.
TELLERS FOR THE NOES.—


Gluckstein, L. H.
Ponsonby, Col. C. E.
Mr. Cross and Mr. Munro.


Motion made, and Question, "That the Clause be added to the Bill," put, and agreed to.

NEW CLAUSE.—(Computation of profits and accounting periods.)

(1) For the purpose of the national defence contribution the profits arising from a

trade or business in each chargeable accounting period shall be separately computed, and shall be so computed on income tax principles as adapted in accordance with the provisions of the Schedule (Adaptation of income tax provisions as to computation of profits) to this Act.

For the purpose of this subsection the expression "income tax principles" in relation


to a trade or business means the principles on which the profits arising from the trade or business are computed for the purpose of income tax under Case I of Schedule D, or would be so computed if income tax were chargeable under that Case in respect of the profits so arising.

(2) For the purpose of the national defence contribution, the accounting periods of a trade or business shall Le determined as follows:—

(a) in a case where the accounts of the trade or business are made up for successive periods of twelve months, each of those periods shall be an accounting period;
(b) in a case where the accounts of the trade or business have been made up as aforesaid bat have ceased to be so made up, the accounting periods from the end of the last period of twelve months for which they were so made up shall be such periods not exceeding twelve months as the Commissioners of Inland Revenue may determine;
(c) in any other case the accounting periods of a bide or business shall be such periods not exceeding twelve months as the Commissioners of Inland Revenue may determine;
and the expression "chargeable accounting period" means—

(i) any accounting period determined as aforesaid which falls wholly within the five years beginning on the first day of April, nineteen hundred and thirty-seven; and
(ii) in a case where any such accounting period falls partly within and partly without the said live years, such part of that period as falls within those five years.

(3) Where a chargeable accounting period is not a period for which the accounts of the trade or business have been made up, such division and, apportionment to specific periods of the profits and losses for any period for which the accounts relating to the trade or business have been made up, and such aggregation of any such profits or losses or any apportioned part thereof, shall be made as appears necessary Ito arrive at the profits arising in the chargeable accounting period.

(4) Any apportionment under the last foregoing subsection shall be made in proportion to the number of months or fractions of months in the respective periods.—[Sir J. Simon.]

Brought up, and read the First time.

Motion made, and Question proposed, "That the Clause be read a Second time."

6.50 p.m.

Mr. Pethick-Lawrence: There was an agreement yesterday that if we had a discussion on the new Clauses as a whole it should not be in any way repeated on the Second Reading of individual Clauses, and I have no wish to break that understanding in any way, but there was one matter which was not finally cleared up

in that discussion yesterday, and I raise it now for the purpose of getting a little more information, and do not wish to go beyond it in the discussion of the Clause. The point concerned the interpretation of the words in line 9 of the Clause:
or would be so computed if Income Tax were chargeable under that Case in respect of the profits so arising.
The question asked was whether those words would catch the friendly societies, and the Chancellor then said that he did not think they were included, but that if there were any ambiguity on the point he would further consider it. I wish to ask the Chancellor whether he has now satisfied himself as to the precise effect of these words, and whether they will, in fact, embrace friendly societies.

6.52 p.m.

Sir J. Simon: I will answer quite briefly, because I agree with the right hon. Gentleman that there is an understanding that we shall not have a discussion of a general character. The answer to his question is that as we now have these Clauses framed friendly societies will not be caught. The reason I showed a little hesitation yesterday was that it seemed to me that there might be a misunderstanding if the words to which the right hon. Gentleman has referred stood alone. I was quite confident in my own mind that it would be found that friendly societies were not caught, but I agree that it was a discussible point and no one wants to leave it like that. If my right hon. Friend will turn to the new Schedule headed:
Adaptations of Income Tax provisions as to computation of profits.
he will see that what we are proposing to do to clear up this point completely is to put into the Schedule these words which are in paragraph 6:
Subject to the provisions of the last foregoing paragraph, the profits shall include all such income arising from the trade or business as is chargeable to Income Tax under Case I of Schedule D, or would be so chargeable if the profits of the trade or business were chargeable under that Case, except income which is, or would be, exempted from Income Tax by virtue of section thirty-nine of the Income Tax Act, 1918, or section thirty of the Finance Act, 1921.
If the right hon. Gentleman will look at the Sections of the Acts there referred to he will find that it will be absolutely certain that friendly societies are not within this new tax.

Mr. A. V. Alexander: Are those the Sections in the Acts of 1918 and 1921 which deal with industrial and provident societies?

Sir J. Simon: I cannot say at the moment, but it will be some time before we come to that Schedule. There is another case besides that of the friendly societies which will be covered.

Mr. Alexander: I would wish to safeguard the point, because we had in mind the moving of an Amendment to delete the Clause, and I might want to put down an Amendment on the Report stage.

Sir J. Simon: The Section, I find, refers to trade unions. It is rather difficult to imagine a trade union being taxed, but there is a provision in the Income Tax law to exclude it.

6.55 p.m.

Mr. H. G. Williams: I beg to move, as an Amendment to the proposed Clause, in line 38, to leave out "months or fractions of months," and to insert "days."
I think the purpose of this Amendment, which I am moving on behalf of my hon. Friend the Member for South Kensington (Sir W. Davison), is self-evident. It seems a little more simple to work this out on the basis of the number of days. In practice His Majesty's Paymaster-General pays salaries on the proportion of days, and I think the Government might as well collect the taxes on the same basis.

6.56 p.m.

The Attorney-General: The Clause, as drafted, follows not only the same lines as were adopted in the case of the Corporation Profits Tax but also the corresponding Income Tax provisions in the Finance Act, 1936. The difficulty arises when you have six months. If we take the monthly system, which is the one in the Clause, the six months are half a year. If you take days, you have to add them all up and put 365 underneath. The present method is one which is understood by accountants and for some special reason they desire it, and I suggest that we should stick to the practice of having months or fractions of months. As to the second Amendment in the name of the hon. Member for

South Kensington (Sir W. Davison) I think that deals with the same point really as that of the Amendment below it in the name of the hon. and learned Member for Montgomeryshire (Mr. C. Davies), and my right hon. Friend is prepared to accept this one if the words "of Inland Revenue" are inserted after the word "Commissioners." I know that in making that statement I am going beyond the Amendment which is before us, but I thought it might not be out of order to let my hon. Friend know about it at this stage.

Mr. H. G. Williams: Owing to the fact that the existing bad practice is apparently so well established, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. H. G. Williams: I beg to move, as an Amendment to the proposed Clause, in line 39, at the end, to add:
unless the Commissioners of Inland Revenue having regard to any special circumstances otherwise direct.
I am moving this Amendment on behalf of the hon. and learned Member for Montgomeryshire (Mr. C. Davies).

Amendment agreed to.

NEW CLAUSE.—(Exemption and abatement in respect of minimum profits.)

(1) Where the profits arising in any chargeable accounting period from a trade or business do not exceed two thousand pounds, those profits shall not be chargeable to the national defence contribution.

(2) Where the profits arising in any chargeable accounting period from a trade or business exceed two thousand pounds but are less than twelve thousand pounds, those profits shall, for the purpose of assessment to the national defence contribution, be reduced by a sum equal to one-fifth of the difference between the amount of those profits and twelve thousand pounds.

(3) In relation to a chargeable accounting period of less than twelve months, references in this section to two thousand pounds and twelve thousand pounds shall be construed as references to a sum which bears the same proportion to two thousand pounds or to twelve thousand pounds, as the case may be, as the length of the period bears to twelve months.—[Sir J. Simon.]

Brought up, and read the First time.

6.59 p.m.

Sir John Mellor: I beg to move, as an Amendment to the proposed Clause, in line 13, at the end, to add:
(4) The amount of tax payable in respect of the profits of a company for any accounting period shall in no case exceed the amount represented by ten per cent. of the balance of the profits of that period after deducting from the amount of those profits any interest or dividends actually paid out of those profits at a fixed rate or any debentures, debenture stock, preference shares (so far as the dividend thereon is at a fixed rate) or permanent loan issued before the commencement of this Act or on any debentures, debenture stock, or permanent loan issued after that date for the purpose of replacing an equal amount of any debentures, debenture stock, or permanent loan issued before that date.
I am moving this Amendment, which stands in my awn name and the names of certain of my hon. Friends——

Sir Irving Albery: On a point of Order. I wish to ask whether it would be convenient and possible for the Amendments to the proposed Amendment standing in my name and that of my right hon. and gallant Friend the Member for Ripon (Major Hills) to be discussed at the same time.

The Deputy-Chairman: I am not quite clear whether the hon. Member wishes to move his Amendments. If so we shall have to take them in their proper place.

Sir I. Albery: I want to move my Amendments to the Amendment.

The Deputy-Chairman: Then the hon. Member must wait till they are called.

Sir J. Mellor: These words are virtually a reproduction of the words of Section (52, b) of the Finance Act, 1920, which related to the Corporation Profits Tax and the purpose of these words is to add an over-riding limit so that the amount of tax payable in respect of the profits of a company shall in no case exceed the amount represented by 10 per cent. of the balance of the profits after deducting from the amount of those profits any interest or dividends actually paid out of those profits at a fixed rate on any debentures or preference shares. The Chancellor of the Exchequer, in moving the Charge of the National Defence Contribution, referred to the question of the over-riding limit, and he first made the objection that it could not be applied to partnerships. That is true, but it is not

comparing like with like, and I suggest that it is no answer to a claim that ordinary shareholders of a company are suffering an injustice to say that there is no corresponding injustice inflicted on partners in a partnership.
He proceeded to make another objection and that was, in the case which he instanced where you had two companies both making the same profit; the company which only had a very small amount of preference shares would pay the National Defence Contribution in full, whereas a company with a large amount of preference shares ranking in front of ordinary shares would pay considerably less. If that objection is valid now, it was valid also in the days of the Corporation Profits Tax. But he proceeded to consider the case where the whole of the profits is absorbed in paying preference dividends and he pointed out that under the terms which have been embodied in this Amendment, because one-tenth of nothing is nothing, no National Defence Contribution would be paid by that company. That is perfectly true, but let us consider that case for a moment. Under the Bill if you have a company the whole of whose profits are only just sufficient to satisfy the payment of cumulative preference dividend, then either one of two things will follow. Either the company will have to default upon payment of its cumulative preference dividends, which means piling up arrears, a handicap to that company's future business, or it will have to pay its National Defence Contribution out of reserves, and I am sure that the Chancellor of the Exchequer will not suggest that that is a desirable situation.
I want to know exactly what is in the Chancellor's mind. If he is not prepared to limit the tax upon the balance of profits after the deduction of fixed interest and fixed dividends to a matter of 10 per cent., would he be prepared to limit it to some other percentage? If he wants more than 2s. in the £, would he be content, say, with 5s. in the £ or 10s. in the £? I am afraid that I do not seem to evoke any response. Does he want 15s. in the £ or does he want the whole lot? As a matter of fact, under the Bill as it stands, he is proposing in some cases to take more than the whole lot.

Mr. Garro Jones: The hon. Member is asking what is in the Chancellor's mind, but what is in his mind as to the method


by which he would prevent companies inflating the fixed dividend on their preference shares so as to absorb the whole of the profits and the whole of the percentage which the Chancellor might allow?

Sir J. Mellor: If the hon. Member will read the words on the Paper he will find that the matter is dealt with in the last part of the Amendment:
interest or dividends actually paid out of those profits at a fixed rate on any debentures, debenture stock, preference shares (so far as the dividend thereon is at a fixed rate) or permanent loan issued before the commencement of this Act or on any debentures, debenture stock, or permanent loan issued after that date for the purpose of replacing an equal amount of any debentures, debenture stock, or permanent loan issued before that date.

Mr. Garro Jones: Mr. Garro Jones rose——

Sir J. Mellor: I hope that the hon. Member will deal with the point later, and allow me to proceed with the discussion of my Amendment. I feel that the motive which has actuated the Chancellor of the Exchequer in discussing this matter so far has been due to what I may call almost an obsession that this tax should be a tax upon the institution of the company, rather than a tax on individuals. That can be carried to extremes—even to pedantry. He has distinguished debenture interest; he has distinguished that because it is payable to creditors. On the other hand, he has referred to dividends on preference shares as merely a question of distribution, a private arrangement or contract by virtue of the articles of association. That is technically quite correct, but the point is this: It has often been largely a question of accident how a company has evolved; whether it has been constructed with a large amount of debentures or whether it has a certain proportion of preference shares to ordinary shares, and so on. That has often just been a question of what appeared to be the most convenient arrangement at the moment, and in these days in many cases there is no very great distinction between debentures and preference shares in practice, so much so that we find companies issuing participating debentures or income debentures and we know of redeemable preference shares.
The distinction is no longer as definite as it used to be, and therefore I feel that the Chancellor ought to look at this

matter as it affects the commercial community rather than as it would be regarded in a court of law. I suggest that the cost of this Amendment is not going to be enormous, because the only companies which will be seriously affected or benefited will be those companies one can describe as being very highly geared. Further, this is a perfectly simple Amendment. The Chancellor, on 21st June, used these words:
I think that this provision"—
referring to the proposal for an overriding limit—
would introduce a complication, and I hope that this tax, whatever else it may he known as, will be known as a simple tax."—[OFFICIAL REPORT, 21st June, 1937; col. 864, Vol. 325.]
I am sure that we are all with the Chancellor in that, but many of us when we read some of the words in the new Clauses felt that it did not now appear as simple as once we hoped it would be. But, compared with the complications which must arise out of much of the phraseology which he has put upon the Paper, the words which my hon. Friends and I have put on the Paper are very simple and straightforward. Unless this overriding limit is reintroduced—it worked perfectly satisfactorily in the case of the Corporation Profits Tax—many business enterprises are going to be seriously crippled and the Chancellor of the Exchequer would be the last person, I am sure, to desire to see enterprises in this country discouraged.

7.10 p.m.

Mr. Boothby: I beg to support the Amendment. My hon. Friend has really covered the ground. The Amendment is lucid and no one could fail to understand the words. They would be of benefit to the highly geared company. On the whole, that is a good thing from the point of view of the general body of the community of shareholders in this country. The only point I would like to make, supplementing an argument which has already been addressed to the Committee by my hon. Friend, is that I think that a lot of us are still rather unhappy about the difference made by these proposals between debentures and preference shares. There is, of course, a complete legal distinction between them, but in commercial practice there has been in recent years a great diminution of any


practical difference between a debenture and a preference share, and it seems to me that the proposals taken as a whole benefit or hit a company to a large extent because of the wholly fortuitous way in which that company's capital is built up and was created. There is no doubt that any company with a large number of debentures is going to score and that a company which for reasons which may have been good at the time and which had no connection with this tax, has a large number of preference shares, is going to be very hardly hit. I suggest to the Chancellor that there may be a real injustice here, and while I do not know whether lie is going to accept this Amendment or not, I ask him seriously to consider whether he does not think that in this proposal as a whole an unjust distinction is made in favour of the company which by mere accident happens to have a capital structure consisting of debentures rather than preference shares. It is to that point that I wish to direct the attention of the Committee.

7.13 p.m.

Sir I. Albery: I want to add only one word. I feel sympathetic to this Amendment. It does not seem to me to be a question of what the legal difference may be between a debenture and a preference share. The object of the Clause is to tax the equity holder. If I may give the right hon. Gentleman one example, under his Clause as it stands, if a company is earning, for instance, £100,000 in the year, and has to meet a debenture interest of £20,000, it appears that that company will have to pay the tax on £80,000. If a similar company is earning £100,000 and has to pay interest of £20,000 on a preference share, perhaps bearing interest at a lower rate than the debenture, that company will have to pay the tax on £100,000. It is obvious that any good company in good credit, if it wants to raise money is not going to put out a debenture if it can put out a preference. Nor can it be in the interest of good busniess that they should be compelled to do so. I hope, for all those reasons, that the right hon. Gentleman will give consideration to this Amendment.

7.15 p.m.

Major Hills: I submit that lawyers are apt to make too great a distinction between debentures and preference shares.

Many a man who invests in preference shares is lending money to the company, it may be at a lower rate of interest. Why should the chance that one company raises its preference capital by debentures, and another raises its debenture capital by preference shares, cause them to be differently treated? In many cases the ordinary capital has been heavily written down and the preference capital left intact, but all those cases will suffer very severely. The only important different between debentures and preference shares is the amount of the profits that comes to one or the other. That is the only business effect. They are similar. In the case of fixed dividend preference shares there is a strong reason for accepting the Amendment, possibly with the Amendment to the Amendment which will be moved by my hon. Friend. I feel strongly that certain cases, not selected cases, but cases that depend upon pure chance, might suffer severely.

7.17 p.m.

Sir I. Albery: I beg to move, as an Amendment to the proposed Amendment to the proposed Clause, in line 4, to leave out "at a fixed rate."
I will move this Amendment more or less as a formality, because the Chancellor of the Exchequer made a point that there are some preference shares that carry a very high rate of interest, sometimes 15 per cent. or even 20 per cent. The object of my Amendment is that the equity shareholders of such companies should benefit only to the extent of 5 per cent. of the preference dividend. That would be an equitable proposal. In the circumstances, 5 per cent. is a reasonable rate of interest.

7.18 p.m.

Mr. Garro Jones: This attempt to bring preference shares into the same category as debentures ought to be resisted by the Committee.

The Deputy-Chairman: Before we discuss that subject we had better dispose of the Amendment to the Amendment.

Mr. Garro Jones: Is not the point the same?

The Deputy-Chairman: No. The Amendment to the proposed Amendment merely says that if preference shares are taken out, they should not exceed a fixed


rate of 5 per cent. We had better dispose of that point first, and then we can discuss the proposed Amendment.

Mr. Garro Jones: The limitation sought by the Amendment applies both to dividend and to preference shares. The attempt is being made to bring preference shares into the same category, and we must rebut the attempt and the argument at one and the same time. It is necessary to indicate what is the fundamental difference between debentures and preference shares. The right hon. and gallant Gentleman the Member for Ripon (Major Hills) said there was no difference, except a small lower rate of interest.

The Deputy-Chairman: We really must get rid of the Amendment to the Amendment before we proceed to that argument.

Question proposed, "That the proposed words be there added."

7.21 p.m.

Mr. Garro Jones: In view of the attempt that is being made, to which I have already referred, it is as well to point out that debentures are secured upon the assets of the company, irrespective of the liabilities. If the hon. Gentleman has debentures for £20,000 on a company, and that company has £20,000 worth of assets and £100,000 of liabilities, and if he forecloses upon the company, he will be able to get his money out of the assets, in spite of the liabilities. That is the fundamental difference between preference shares and debentures. Any attempt to reduce, as this Amendment would reduce, the liability of preference shares to tax, must be resisted to the last ditch. As far as I can see, there is nothing in the Amendment to deal with the difference between preference shares and ordinary shares. If a new company is formed, these benefits would not appear to apply to it, in the Amendment as moved by the hon. Member. That seems to be a serious defect. A still further defect is, if a company has £100,000 preference shares and it cancelled a certain number of them and issued those shares at a higher fixed rate, they would he exempt from tax under the Amendment. I sincerely hope that the Chancellor will

not need to say very much in rebutting the proposal.

7.23 p.m.

Sir J. Simon: The arguments on this subject must be fairly familiar by this time. When I spoke upon the Resolution, I thought it right to say something about this subject because I knew that many people who had been looking into the matter had observed that in the Corporation Profits Tax there was a limiting provision of this kind. It naturally occurs to anyone that perhaps the same provision should be inserted now. As my hon. Friend reminded the Committee, when the Resolution was under discussion, I did deal with this matter at some little length. He has been good enough to deal with some of the observations I then made. When I had made my speech, some hon. Members who took part in the Debate, including my hon. Friend the Member for the City of London (Sir A. Anderson), no mean authority on the subject, admitted the force of my argument. A good many hon. Members saw no answer to what I suggested, although the hon. Member is perfectly right in raising it.
Briefly, the answer is—we must not skate over this point—that we must remember that whereas the Corporation Profits Tax was solely on the profits of corporations, the present tax applies to firms and individuals carrying on business as well as to companies. It would be very odd if we were to incorporate into such a scheme a limiting provision which, the hon. Member admits, can apply only to companies and which the Amendment shows does apply only to companies. That would not be equal treatment between one taxpayer and another. I have taxed my brains to consider whether I can devise some form of consideration in the case of firms, but I have not succeeded, and I gather that nobody, either my hon. Friend or anybody else, has succeeded since then. The tax applies to individuals as well as to companies, and that is a good reason for not putting in anything which will admittedly operate only for companies and can never operate for individuals and firms.

7.26 p.m.

Mr. Bracken: A large part of this tax will come from companies and not from individuals, and it really is a quibble for


the right hon. Gentleman to quote those instances. Because a few private firms cannot be helped by the Amendment, a vast number of companies who have to pay the tax are to have their claims disregarded.

7.27 p.m.

Sir J. Simon: I do not know whether what I have been saying is a quibble, but perhaps the particular language to which the hon. Member refers was not clear. I am pointing out what is perfectly legitimate, that even if it were the case that the greater part of the yield was coming from companies, it would still be necessary to meet the case of firms. So much for the quibble. Then it is not a case, as the hon. Member may have thought, of merely applying a similar provision to that contained in the Corporation Profits Tax. I will point out the distinction. In the case of the Corporation Profits Tax, the 5 per cent. was on the profits, including debenture interest and not excluding it. It was a tax on profits which included investment income. The tax we are now considering is 5 per cent., so far as companies are concerned, on profits less debenture interest, and it does not apply to investment income. When I heard my right hon. and gallant Friend the Member for Ripon (Major Hills) speak of the way in which debentures were treated, I wondered whether he would like us to say: "Very well, you shall not be allowed to deduct your interest on debentures. We shall seek to get the tax on the larger sum before you pay your debentures."
We are therefore dealing with a rather different subject. I want to come to what my hon. Friend regarded as a fundamental difference. The hon. Gentleman who interrupted me just now will see that this can hardly be described as a quibble. I doubt very much whether the conception involved in this form of Amendment is fair, and I will tell hon. Members why. Suppose you have a company which, after it has paid its interests on debentures is left with £50,000. If that company needs that £50,000 to pay the interest on its preference shares, nothing will be left for the ordinary shareholders, which is the case with many companies. If there is to be nothing for the ordinary share-

holders, the company would not be subject to the tax at all. I should have thought that in that case it was manifest that fairness required that you should take from the £50,000 the amount of this tax and that the preference shareholders would to that extent go short.
I see no reason why, because there are preference shareholders whose claims would absorb what is left in the form of profits, therefore the company should pay nothing. I should have thought the thing to do would be to slice off the bottom, not the top, of the profit enough to pay the tax, and then having done that, of course, the rest of the profit would be available to be distributed in the ordinary way. The equity shareholder is the man who is taking the rough with the smooth. He says, "If profits are high, I am going to gain more, but if profits go below that, I am the unfortunate one, because prior interests are entitled to be paid before me." I really cannot see my way to take every company in the Kingdom and reconstruct, on some principle or other, the respective rights of the proprietors as between themselves. Everybody buys and sells his shares on the basis of the contract, and it would be an extraordinary thing to say that there may be cases where the ordinary shareholder is hard hit, and therefore I propose to rearrange their respective rights.
To sum up my argument, first of all, there is the fact, which is very simple, that you must really devise some plan which will operate fairly as between firms and companies. That was the whole point of the Amendment moved the other day by the hon. Member below the Gangway here. The second point is that this is not the same thing as the Corporation Profits Tax, but quite a different scheme. The Corporation Profits Tax put part of the contribution on the money that was needed for paying debenture interests. I do not attempt that. The third thing is that I do not think the remedy proposed by the Amendment is fair as between one company and another, because it would be a purely artificial and haphazard thing to make a condition of the kind proposed. With these considerations in mind, I hope the Committee will see that the matter has been very carefully considered and analysed, and I regret that I cannot


accept the Amendment moved by my hon. Friend.

7.35 p.m.

Mr. Bracken: The Chancellor of the Exchequer says that it is not possible to rearrange the capital of all the companies in the country, but what he has not attempted to do is to give us any alleviation of the unfairness of this tax. When he talks about people buying shares, he says they must accept risks, but had the ordinary shareholder known the methods that were to be proposed by the Chancellor of the Exchequer in this National Defence Contribution, he might not have bought those ordinary shares. The Chancellor of the Exchequer speaks with ease about his difficulties, but the whole basis of our argument against his proposal here is that he has chosen one class of shareholder alone to bear the burden of this taxation. Is the ordinary shareholder to be regarded as a criminal that he is to be singled out in this invidious way for taxation?
The right hon. Gentleman says that the ordinary shareholder bears all the risks of the company if anything goes wrong. In bad times he gets no dividend, and in good times it is now proposed to chop his profits down by another 10 per cent., rising in many cases to 100 per cent. But what the Chancellor will not do is to give us an explanation of why he singles out the equity shareholders to bear this burden. If he could answer that question, all our objections would be removed. He comes along and gives us a very eloquent description of his difficulties in trying to deal with accidental or chance capitalisation of companies, but he evades the whole issue. When I used the word "quibble," I did not use it in an offensive sense, but I meant that the great objection in industry to this tax is the fact that this particular type of shareholder is singled out for special taxation, and the more we bring the Chancellor of the Exchequer up to the point of trying to get him to explain why he does this, the more he falls back on questions of chance capitalisation and so on.
I really think the right hon. Gentleman should consider what he is doing by this tax. If he is going really to discourage subscription to ordinary shares, he is going to do a great disservice to industry. The capitalist system depends

largely on the people who are willing to take chances. If you want to raise money for new industries from the rentiers of this country, who are the people who normally buy debentures, you will very soon find that they will not put their money into new industries. It is what the Americans call the forward-minded chaps who are the creators of new industries. Now the Chancellor of the Exchequer comes along and says, "I am very sorry, but I cannot rearrange the business of this country. I have got to impose a tax, and therefore I shall put a big, heavy tax on the enterprisers."

Sir J. Simon: We put a tax on profits.

Mr. Bracken: The right hon. Gentleman puts the tax on the part of the profits that is taken by equity shareholders. He used an extraordinary argument about the preference shareholders. Is a man who holds six per cent. preference shares to be told, "We have not got enough money to pay six per cent. and this tax, and then give something to the ordinary shareholders, so we will give you 4 per cent."? Any company that did that would very quickly find itself haled before the Court. However, it is obvious that you cannot get the Chancellor of the Exchequer to change his mind. He is determined to tax the equity shareholders, and I venture to think that he will live bitterly to regret this policy. If he taxes the enterpriser in this way he will find that he will not come forward in the future in such great numbers.

7.41 p.m.

Mr. Alexander: I have listened with very great interest to the very detailed and, I think, unanswerable arguments of the Chancellor of the Exchequer. When, later on, dealing with the Schedule, some of us put forward the very firm claim both of the building societies and of the industrial and provident societies that the application of this new tax to them shall be on the basis of the assessment which has already been approved by Parliament under the Income Tax law, I hope the right hon. Gentleman will turn an equally deaf ear to those who plead that he should depart from the rectitude of the Financial Resolution, and that he will strictly follow the Income Tax rules.

7.42 p.m.

Mr. Spens: I regret very much indeed that there is a great outcry on the part of those who own equity shares in this particular connection. You have all sorts of capitalisation in this country. You have cases where the preference shares carry a very large rate of interest, and there may be cases, and there will be some, where the only people who will suffer from this tax will be the preference shareholders themselves, who will go shorter than they otherwise would in respect of their dividends. You have also a vast number of preference shareholders in this country who, in addition to a small or even a large fixed preference dividend, share in ordinary dividends as well, and those preference shares will bear their burden with the ordinary shares. It is quite true that in a great number of cases of companies in this country the persons who will ultimately bear the burden will be ordinary shareholders. This is a further deduction from the general profits of the company and the people who subscribe to ordinary shares in this country subscribe for them knowing perfectly well that whatever accident it be, whether it be an act of God or an act of the National Government, they are the people who will bear something that unexpectedly comes upon them. I venture to suggest that to represent this as an attack on the ordinary shareholders is completely unfounded in law, which I am aware does not appeal to the Committee, but I also think it is wholly unfounded in fact.

Mr. Boothby: I agree with every word that the hon. and learned Member says, but would he not say this, that the owner of ordinary shares in a company which likes to have debentures rather than preference shares under these proposals will have a better time? It is rather tough luck on the owners of shares in a company which has been capitalised in such a way as to have preference shares rather than debentures.

Mr. Spens: My hon. Friend has mentioned another important factor, but there it is. Some companies prefer to capitalise themselves with debentures, and it is a very important matter to remember that the owner of the ordinary shares who has only got preference shares in front of him is very much safer in bad times than the owner of ordinary shares who has a large issue of debentures in front of him. There

is all the difference in the world between those two cases. If I may turn for a moment to the Amendment, the Chancellor of the Exchequer said it was entirely beyond his power to control the capital of companies in this country, but I would remind him that it is not outside the powers of shareholders to vary substantially their rights as between themselves, and as this Amendment is worded, I can see very well, if it is passed in this form, ordinary shares being slipped into three-quarters preference shares carrying a fixed rate of dividend and their interest on their preference shares thereby becoming deductable before any tax was payable at all, and probably being able to escape the tax. On those grounds, while disagreeing in principle entirely with the argument addressed on behalf of ordinary shareholders, I respectfully suggest that the Amendment itself would not effect what its Movers are endeavouring to do.

7.45 p.m.

Mr. Tinker: On the occasion of the withdrawal of the original National Defence Contribution, assurances were given that there would be general assent to a simpler proposal—

Mr. H. G. Williams: There were a great many people who were never quite so stupid as to do that.

Mr. Tinker: The Chancellor was urged from all quarters of the House to withdraw his original proposal, and he received assurances from everyone who spoke that, if a simpler form of tax were adopted, he would get even more than the amount he originally estimated. Now we have protests from hon. Members on the other side, including the hon. Member for North Paddington (Mr. Bracken). The hon. Member for North Paddington does not take much part in our Debates, but when we are discussing monetary matters he comes along and urges all his objections to the particular plan that is put forward. He assures us that he has no personal interest in this matter. Does he mean a direct personal interest, or something that is a long way round?

Mr. Bracken: I think the hon. Member's remark is very offensive. I consider that every Member of Parliament comes here to try to serve his constituents, and not in any way to forward his private interests. I think the hon. Member ought to withdraw that offensive remark.

Mr. Tinker: Not at all. Indirectly we are all concerned. When I speak on behalf of the miners, I am indirectly concerned, and it is a personal interest that I have in them. When hon. Members on the other side speak for rich people, they have a personal interest, because they are rich people. Now we have the threat that, if this kind of thing is proceeded with, people who have invested money will consider taking it away and letting the whole thing fall to the ground. Those who invest money are getting a jolly good thing out of it, and, so long as that obtains in this country, they will always be ready to invest their money. When they fail to get a return, we may expect to see some capital going to other countries. I trust that the Chancellor of the Exchequer will pay no heed to this protest. If he would only go forward even a little bit more, he would get support from these benches.

7.49 p.m.

Mr. Mabane: I wish to say in a few words why I hope the Committee will not accept this Amendment. There are two reasons against it, which, I think, so far have not been mentioned. In the first place, if the Amendment were accepted, it would work very inequitably as between company and company, because its effect would be to give a tremendous advantage to the highly geared ordinary share. I am thinking at the moment of two companies. One is Raleigh Cycles, which has a capital of £2,000,000 entirely in ordinary shares, and which, so far as I remember, makes a profit of 10 per cent. The other is Vickers, a company which has enormous capital including only a very small proportion of ordinary shares, and which also, I believe, earns 10 per cent. If this Amendment were accepted, it would result in a most unfair differentiation as between a company of which all the shares are ordinary shares and a company in which a large proportion of the shares are preference shares, with a very small proportion of ordinary shares, and it would operate in such circumstances very unfairly for the Exchequer.
There is another reason, which bears on the point made by the hon. Member for North Paddington (Mr. Bracken). It is not true to say that preference shareholders will not bear any of this burden. One of the most important factors in determining the price of a preference

share is the number of times that the dividend is covered. If this tax is applied to the profits which remain after paying the dividend on the preference shares, that will have the effect of reducing the extent to which the preference dividends are covered, and that, in turn, will have the effect of reducing their price on the market, so that, while the preference shareholder may not be directly affected as regards his dividend, he will be affected as regards the capital value of his holding. These are two important considerations which have not been mentioned before, and which, I think, are additional reasons for rejecting the Amendment.

7.52 p.m.

Mr. H. G. Williams: The hon. Member for Leigh (Mr. Tinker) has suggested that everyone promised, when the original proposal was abandoned, enthusiastic support for its successor, and I am not unaware of the fact that a great many eminent business men were unwise enough to commit themselves in that way; but many others of us were rather too old at the Parliamentary game ever to commit ourselves in advance to support something that we had never seen. This tax is frankly a bad tax. It has only one merit—it is not as bad as the one that it superseded. We know that it is bad from past experience. It is the Corporation Profits Tax slightly extended. The old Corporation Profits Tax was abandoned for precisely the reason that this Amendment is being moved to-night. [Interruption.] I am asked what is the difference.
Let us consider its application where the conditions are the same as those of the old Corporation Profits Tax. So far as it applies to corporate bodies, it has the same effect on them as the old tax, which was abandoned, to the delight of Parliament, in 1923. Everyone agreed that it was a bad tax; it had not a friend left. I agree that there may be certain difficulties about the Amendment, because the tax is not the Corporation Profits Tax in this respect, that it is extended to unincorporated bodies and persons. That may be a ground of criticism against this Amendment, but I would remind my hon. and learned Friend the Member for Ashford (Mr. Spens) that even in the bad Corporation Profits Tax there was the principle of this Amendment. It is no


use his saying that when you invest in ordinary shares you take the risk of an act of God or an act of the Chancellor of the Exchequer. Against an act of God we cannot do much, but, thank God, we can do something against the Chancellor of the Exchequer, and we are entitled to do what we can. My hon. Friend the Member for North Paddington (Mr. Bracken) put his finger on the point. It is no use the hon. Member for Leigh saying that the wicked capitalists do these things and it is very naughty of them. Every human being in this land tries to arrange his business to his greatest advantage——

Mr. Tinker: That is what I said.

Mr. Williams: Precisely. At the present moment a great and friendly country is in a mess because large numbers of people there are disturbed as to what is happening, and are trying, rightly or wrongly, to put their wherewithal outside the control of the Government of that country. It may be said that that is unpatriotic, but it does not matter; there is no country in the world in which it is not done. Germany to-day is starved of capital because of its ill-treatment of the Jews. You cannot pass legislation which imposes on people burden which they think are unfair without their taking steps to defend themselves. There will be a rearrangement of capital structure, there will be a greater reluctance, as my hon. Friend the Member for North Paddington said, on the part of people to invest in industrial concerns, and in a few years' time this tax will be abandoned, because it will then be recognised that it is a bad tax.
Indeed, there are no sensible new taxes. The only taxes that are sensible are those which have been gradually arrived at, with all their proportioning and adjustments to fit in with all the hard cases. The moment anyone comes along with a bright idea for a new tax, he comes along with a bad idea. We have arranged the structure of our taxation on the assumption that, the richer you are, the higher the proportion that you pay. That is the generally accepted principle, but it is not the principle of this tax. A great many people who are quite poor will pay the equivalent of an extra 2s. in the £ on the Income Tax, and a great many rich people will not pay a shilling. It completely departs from the principle,

which we have gradually built up, of the upward graduation of taxation. I am glad to have this opportunity of saying that the tax in essence is a bad tax. We accept it because we know the difficulties of the Government. Their first proposal was so bad that it had to be abandoned, and in a hurry they produced something else. In the circumstances we have to support it, but do not let anyone be under any misapprehension that we think it is a good idea. We think it is very bad. I have much sympathy with the Chancellor of the Exchequer in his position of having become the unfortunate parent of such a dubious child. I wish him luck with it, and hope it will turn out better than the last, but we are not to be charged with any inconsistency because we were not unwise enough to commit ourselves, as other people were.

7.58 p.m.

Mr. George Balfour: I listened with close attention to my hon. Friend the Member for North Paddington (Mr. Bracken) and to my hon. and learned Friend the Member for Ashford (Mr. Spens), and felt that I agreed with them both, especially my hon. and learned Friend, who stated a case which was indisputable. I should like to make a suggestion to my right hon. Friend the Chancellor of the Exchequer as to how he might meet the objection raised by the hon. Member for Huddersfield (Mr. Mabane) with regard to the difference in the gearing of the capital of these companies. I suggest that he might well consider, between now and Report, making this allowance of 10 per cent., or some other percentage, apply, not merely to the assessment after deduction of debenture interest and preference dividends, but to the gross assessment, so that the limit would apply before the deduction of debenture interest and preference dividends. It would thereby bring all companies to a common denominator by making the assessment on their actual gross earnings. I make that suggestion to my right hon. Friend because I believe that there is a serious case to be made out as to the unlimited burden on the equity shareholder. That he should take his luck of suffering a reduction of dividend in bad times and getting a big dividend in good times is right and fair, but I think that, in this temporary tax, there should be a limit


which is capable of reasonable computation by the equity holder, and I trust that my right hon. Friend will give consideration to this suggestion between now and Report. Naturally, I should be the last to ask the Chancellor for any definite commitment at this moment; it would be unfair to do so; but I think he might well give consideration to my suggestion and see if it is not possible, without damage to his revenue, which I do not think it would affect by more than a very small fraction, to satisfy the equity holder that proper attention has been paid to this point.

Amendment to the proposed Clause, negatived.

NEW CLAUSE.—(Assessment, collection, appeals, etc.)

(1) The national defence contribution shall be assessed and collected by the Commissioners of Inland Revenue in accordance with the provisions of Part I of the Schedule (Assessment and collection of national defence contribution, appeals and supplementary provisions) to this Act, and shall be due and payable at the expiration of one month from the date of the assessment, and shall be recoverable as a debt due to His Majesty from the person on whom it is assessed.

(2) Any person who is dissatisfied with any such assessment may appeal subject to and in accordance with the provisions of Part II of the said Schedule.

(3) The provisions of Part III of the said Schedule shall have effect for the purpose of carrying into effect the provisions of this section and of Parts I and II of the said Schedule and otherwise for supplementing those provisions.—[Sir J. Simon.]

Brought up, and read the First and Second time, and added to the Bill.

NEW CLAUSE.—(Deduction of National Defence Contribution in computing liability to Income Tax.)

(1) The amount of the National Defence Contribution payable in respect of the profits arising from a trade or business in any chargeable accounting period shall be allowed to be deducted as an expense in computing for the purpose of Income Tax the profits and gains arising from that trade or business in that period.

(2) Where an amount is allowed to be deducted as an expense by virtue of this Section, any Income Tax overpaid in consequence thereof by any person shall be repaid to him.—[Sir J. Simon.]

Brought up, and read the First and Second time, and added to the Bill.

NEW CLAUSE.—(Deduction in respect of children undergoing training.)

(1) Section twenty-one of the Finance Act, 1920, which provides for deduction in respect of children, shall have effect as if the references in Sub-sections (1) and (2) thereof to a child receiving full-time instruction at an educational establishment included references to a child undergoing training by any person (hereafter referred to as "the employer") for any trade, profession, or vocation in such circumstances that—

(a) a child is required to devote the whole of his time to the training for a period of not less than two years; and
(b) the emoluments, if any, receivable by, or payable by the employer in respect of the child while undergoing the training, do not exceed thirteen pounds a year, exclusive of any emoluments receivable or payable by way of return of any premium paid in respect of the training;

For the purpose of paragraph (b) of this Sub-section all emoluments at any time receivable by, or payable by, the employer in respect of a child in respect of whose training a premium has been paid shall be. deemed to be receivable or payable by way of return of the premium, unless and except to the extent that the amount thereof exceeds in the aggregate the amount of the premium.

(2) In this Section the expression "emoluments" means any salary, fees, wages, perquisites, or profits or gains whatsoever, and includes the value of free board, lodging, or clothing.

(3) For the purpose of a claim in respect of a child undergoing training the surveyor may require the employer to furnish particulars with respect to the training and the emoluments of the child in such form as may be prescribed by the Commissioners of Inland Revenue.—[Mr. Tinker.]

Brought up, and read the First time.

Mr. Tinker: I beg to move, "That the Clause be read a Second time."
This Clause seeks to extend the Finance Act, 1920, in regard to dealing with the education of children and the relief of taxation in respect of children, to cover other kinds of education, such as education for trades, professions or vocations. It also makes it quite clear that there is not to be any monetary gain for those following that kind of educational training. This has something of a history. It was before the House in 1935, and again in 1936. It is one of those things which, if you believe in them sincerely, it is as well to keep repeating in the hope that you may be able to prevail on enlightened Members of the House to come to our way of thinking. When brought forward in 1935 the first objection was that it was


not properly drafted, and it was felt that there was something in the objection, but, on the request of my right hon. Friend the Member for Bow and Bromley (Mr. Lansbury), who led the Labour party at that time, the Chancellor of the day agreed that the matter should go to the Treasury officials, and this Clause was drafted with their help. The Chancellor objected and it was defeated. We put it down the following year, and again objections were raised by the then Chancellor, the present Prime Minister, and it is rather interesting to hear some of his suggestions. He admitted that there was something in the case. He said:
There is an undoubted anomaly in the fact that the parent who keeps his child at an educational establishment obtains a relief from Income Tax which is denied to the parent who puts his child to another form of education, that obtained by training, whether for a trade or a profession. I frankly admit that there is an anomaly and that the Amendment would remove it, but I have to repeat what I said on a previous occasion, that in removing one anomaly you would create a further series of anomalies."—[OFFICAL REPORT, 15th June, 1936; col. 655, Vol. 313.]
He also said that it did not mean very much to the parents—1s. 7d. in the £ on £50 would be less than £5. The actual sum is £4 15s. He said the total cost would not exceed £100,000 a year. It is evident that it i3 not cost that affects the question.
There is another point that I want the Committee to examine. If the Chancellor admits that this ought to be done in order to remove an anomaly, I do not think we ought to be faced with the question of further anomalies, because if and when they come along they can be dealt with on the merits of the case. I have never before known any case of merit being objected to because it might bring something further in its train. If it is right to give it to one form of educational teaching, it ought to be given to another. Education embraces far more than attending a school or college. The term "education" in the dictionary means bringing up the young by systematic instruction. We are dealing here with the commercial side and, owing to the present state of industry, we are embracing that kind of education. Parents are putting their children to other things than sending them to college.
All we are asking for is an extension of Section 21 of the Finance Act, 1920, and we are appealing to the Committee for the third time to consider this in relation to what has happened since then. On the first occasion we were beaten by 184 to 49, and the voting in 1936 was 212 to 112. We have a new Chancellor. I hope he has not said to his officials, "Look up what we did last time," and framed his reply on that. I hope he is coming to it with an open mind and will brush on one side what the other Chancellor did, and will say to himself, "Although the Prime Minister is a good man, I think I can see further ahead than he can and now is the time to tell these Labour men that I am not hidebound and stereotyped in my outlook. I can go further than the Conservatives can do. I have had a Liberal education. Although I went over to the National Government in a time of stress, I still have those Liberal ideas, and now is an opportunity to show what I can do." If he will do that, many of us will look more favourably upon him.

8.8 p.m.

Sir J. Simon: The hon. Member has a most persuasive way with him, and there is no one who better understands not only how to avoid rousing anyone's sense of resistance, but to commend his proposal with every possible inducement of manner and argument. I should like very much to earn his commendation on this occasion. He invites me to follow the good example of Liberal Chancellors of the past, and I am going to do so.

Mr. Tinker: I did not mention Liberal Chancellors, nor the traditions of the Liberal party.

Sir J. Simon: I well remember when Mr. Asquith was Chancellor of the Exchequer, and many most tempting proposals were put forward which would have resulted in serious loss of revenue, Mr. Asquith, the stoutest of good Liberals, declared that his first duty as Chancellor of the Exchequer was to defend the revenue and not weakly to give way to the most persuasive arguments if the result was that he would lose revenue which he was trying to retain. Following this most strict Liberal tradition, by which I intend to be guided, I cannot on this occasion agree with the hon. Member. The concession would cost


quite a substantial sum, possibly £1,000,000 or £2,000,000, and I simply cannot in present circumstances contemplate that sacrifice of revenue. The fact of the matter is that there is no stopping about concessions of this sort. If we went on, we should find some new point at which we could be asked to make good and sensible concessions, and I would always listen to them when I could afford it, but it is really not possible to do that now.
Of all the countries in the world, we have an Income Tax structure which, thanks to the efforts of all parties in recent years, since I first entered the House, has enormously improved from the point of view of recognising how heavy the burden is upon poor people and upon parents. I can remember when the first proposals were made for relief in respect of children, and I am very glad that they were made. Income tax is infinitely juster and more humane than it used to be. I am not disputing that there may be further adjustments to be made in the future. A Liberal is the first to recognise that there are improvements to be made. But the considerations which were urged so fairly on the earlier occasions I am afraid still prevail.

Mr. Gordon Macdonald: What is the estimated cost of the concession?

Sir J. Simon: I believe the ultimate cost to the Exchequer might approach £2,000,000, though it is very difficult to deal with a matter proposed in a new Clause with very great precision, but I see quite clearly that here again it would hardly be a stopping place. It is very difficult to find a stopping place. It is easy to suggest other cases not covered by the new Clause which in their turn would come forward. Let us hope that times will so improve that we shall be able to make some further adjustments which generally commend themselves, but we cannot do it in the present circumstances.

8.14 p.m.

Mr. Ede: I am sure that Members on this side who remember last year's discussion will have heard the right hon. Gentleman's statement with very great disappointment. I recall the statement of the Prime Minister last year that this year we might possibly be able to get this concession, and an overhaul of the OFFICIAL REPORT will prove that we had

every right to expect that this concession would be made. I regret that the thoroughly false emphasis that the continuation of the present discrimination gives to one form of education should be allowed to continue. The right hon. Gentleman is one of the most distinguished sons of Oxford, and this afternoon he has again been standing for a lost cause. Surely, we all believe nowadays that there are many citizens who do their best work for the community by exercising skill in hand and eye which has no great relation to the literary and mathematical education which is regarded in too many cases as really the only sign of an educated man.
The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), if I may mention an ex-Liberal Chancellor of the Exchequer, though I am not sure whether he is an ex-Liberal or only an ex-Chancellor, in the presence of the present Chancellor of the Exchequer, said that the Great War was an engineers' war, and judging by what is going on at the moment it would appear that the next war is likely to be one, too, and that, at any rate, in the social structure of the country to-day, the ordinary, daily, working skilled engineer is a very important factor in the maintenance of the social fabric. We want to put into the minds of parents, especially those on the lower rungs of the Income Tax ladder, that the skilled preparation of that youth for his daily work, his contribution to the life of the country, is as important as the preparation of the boy who is going into a bank or to take some of the more lowly paid clerical jobs in the country. Placing the parent in regard to Income Tax in the same position with regard to either type of boy, would be one very effective way of bringing that home to a type of parent who at the moment is sometimes too much inclined to think that it is not outside the black-coated professions that an educated boy ought to look for employment.
That is not a financial ground at all; it is a social ground. One of the great works to which the right hon. Gentleman himself has been alluding has been the way in which the Income Tax has been made the engine of carrying through the great social reforms and social readjustments, and this Clause would, I believe, be fully carrying out that line. There was


a pamphlet published by the Board of Education on the application of art to industry, and in the preface it was pointed out that the universities themselves in the early days Were purely vocational institutions for preparing the parson, the lawyer and the politician for the service of the community, and I am afraid too often that is still regarded as the principal job of a university. But in these days we ought to try, especially in view of some of the things we hear from the Board of Education, to see if we cannot get a full recognition of the educational value of the preparation for the skilled trades in these days when a very high degree of theoretical as well as technical knowledge is really required by anyone who is to be a skilled craftsman. I am sure that if the right hon. Gentleman will now do what my hon. Friend said that he hoped he had not done, namely, read the remarks which were made by his predecessor in office last year, he w ill understand the depth of disappointment that we feel this afternoon that he is unable to grant the concession.

8.20 p.m.

Mr. George Griffiths: I am very sorry to tee the attitude Which the Chancellor of the Exchequer has taken up on this question. It is true that he has not been quite so blunt as his predecessor, but I am not sure that he has not been more cold-blooded. I do not know whether he hat read the Debate of last year, but several hon. Members took part in the Debate, which continued from 3·36 until five minutes to five. There were seven speakers on this side, one Liberal, two Conservatives and the Chancellor of the Exchequer, and every one of them spoke in favour of this Clause except the Chancellor of the Exchequer. He did not speak against it from a moral standpoint but largely because he said that, while it was only a small snowball, it would roll into a mountain. That was the point of his speech. The cost of the concession was not quite as large as the present Chancellor of the Exchequer has made out. The Chancellor of the Exchequer last year said that it would cost only £100,000, and not £2,000,000. It is not often that the present Chancellor of the Exchequer is wrong in his figures, but this time he is a long way out. The Chancellor of the Exchequer last year said that although it would cost £100,000, they

were rather afraid of what might come out of it if somebody else asked for such a concession. But if this thing is morally right, why on earth do not the GoVemment adopt it? The Chancellor of the Exchequer last year said that it was only 1s. 7d. in the £ on £60, which was only £5. I know that some of my pals n my Division would like to have that £5 to-night. If they could only get a concession of £5, it would be very willingly received.
There has been a great outcry in the last two years because apprentices are scarce. It has been said that we have not the apprentices as far as engineering is concerned, and the question has been asked, What is to become of us in the near future? You have been looking on the horizon from a war standpoint, and we say that if you want the defences, at least place the parent on an equal footing with the man whose child wins a secondary education. Hundreds of working men's children are to-day winning secondary education to an extent that has never been done in the past. In the little township where I live at the present time they run a special train every morning for the children who go to a secondary school nine miles away, a thing that was not known ten years ago. In respect of every one of these children the parents receive this £60, but if a man sends his son into an engineering shop or apprentices his daughter to something, these children, when they leave school at 14, are a greater expense than if they remained at school, and yet the parents are not allowed this £60.
I am surprised that the Chancellor of the Exchequer says that we cannot do it. I remember that before the late right hon. Member for Hillhead was sent to another place he said, speaking of the £1,500,000,000, "We can take it in our stride." If you can take £1,500,000,000 in your stride, what is to stop the present Chancellor of the Exchequer from saying "I will face up to it, and I will give this concession." I hope that he will take this from one of his leaders of the past. The Chancellor of the Exchequer has tried to make us believe "I am not so much bothered about this, but it what might come after it." I will give him the text of his grandfather, "Wait and see." Perhaps I should say his political father. Someone put a question


to his political father, and he replied: "Wait and see." We are saying to the right hon. Gentleman to-day: "Take your courage in your hands now. Do not bother about what may happen in the future or in the next Budget. Take hold of this question and say that you will give us what we are asking for."

8.26 p.m.

Sir J. Simon: On a point of explanation, I should like to say that I mentioned a figure of £1,000,000 or £2,000,000. I did so on the information before me, but I want to make it plain that that figure was not calculated as the cost of this particular proposal, but that it included some development of it which, as far as we could judge, would become almost irresistible in other cases. I do not wish to leave hon. Members under the impression that this specific proposal would involve that expenditure; it would not, although I cannot give the actual figure. I understand that a much smaller figure was mentioned last year. It would be impossible to make this concession without associating it with other cases, and that was why I gave the greater figure of £1,000,000 or £2,000,000.

8.27 p.m.

Mr. Lansbury: On the last occasion on which we discussed this matter some of us could not understand who were the other claimants that might come along. The hon. Member for South Shields (Mr. Ede) has put up a case which, as on the last occasion, is unanswerable. If one child who is receiving education at an ordinary secondary school or college gets this relief, I should have thought that the Treasury would have objected to that first step along the slippery road to destruction. What we are asking for is that other children in other occupations following a course of instruction perhaps more beneficial to the nation than book-learning and so on, ought to be given consideration. I think we ought not to take too much notice of the argument of the Treasury that the granting of such a concession might lead at some future date to an expenditure of £2,000,000. The Treasury ought to have supplied the Chancellor of the Exchequer with some evidence that he could have given to the Committee in support of that statement. We have not had that evidence. It seems to me that the Treasury are putting up a bogy exactly as they do about increasing pensions. In that case they do

condescend to give us some valid and reasonable argument, but in this case they have not done so.
I do not want to disturb the harmony and good feeling between the right hon. Gentleman and the Committee, but I think he has not got down to this question as we might have expected him to do. He is a man who usually brings things out and gives a reason for his decision. This time he has done nothing of the kind. He has simply stuck up a bogy and said: "If I give you this it will mean £2,000,000 in the future." Nobody knows when, how or why. The merits of the case for the Amendment are indisputable. The right hon. Gentleman does not deny them and the present Prime Minister did not deny them. On the first occasion we went home thinking that we had won the battle. The Committee on that occasion felt that it was only a matter of words and that if we could get the position expressed properly we should get what we wanted, but instead we get this terrible bogy of what might happen.
The parent of a child who continues ordinary education is usually not quite so poor as the parent of a child who goes into an engineering school or into some other sort of training which means apprenticeship for two or three years without earning any money. We have a very big school of this kind in Poplar. I went there the other day. It is a joy to see the boys there learning to use their hands and to develop their intelligence. If the right hon. Gentleman could have seen those boys he would have realised that oft en the parents of these children are just earning sufficient to have to pay Income Tax and that this £5, £6, or whatever the amount may be, is a matter of great consideration. The Chancellor of the Exchequer to-day and the Chancellor of the Exchequer on the last occasion put up the same kind of bogy that the granting of this concession would lead to bigger expenditure in the future. Let me put a motto to the right hon. Gentleman: "Sufficient unto the day is the evil thereof." It is a very good motto, and I ask the right hon. Gentleman to live up to it.

8.33 p.m.

Mr. Lees-Smith: I had intended to put a question to the Chancellor of the Exchequer, but perhaps the information he


might have given can be given by the Financial Secretary. The Debate is left in an unsatisfactory position. The immediate expenditure involved in this proposal is only £100,000. The reason for the right hon. Gentleman refusing to accept it is that it might involve an expenditure amounting to over £1,000,000, because parallel occupations would be brought in. Beyond that bare statement we have not had any information as to what are those parallel occupations and why this expenditure would be increased tenfold. A statement of that kind cannot fairly be used unless the fact on which it is based are given to the Committee, and I invite the Financial Secretary or the Attorney-General to make a statement as to how this larger expenditure would be involved.

8.34 p.m.

Mr. Holdsworth: I support the Amendment and apologise to the Committee for not being present when it was moved, but one must eat at some time. There is a later Amendment in the name of several hon. Members, including myself, which is a much wider Amendment, and as I understand that Amendment is not to be called I must take the opportunity of speaking on this Amendment. I have never been able to understand why there should be class distinction on this question of allowances. If a person is able to send his child to a secondary school or a university an allowance is made. If a working man gives his child any form of further education, why should he be punished? In 99 cases out of 100 he is making a tremendous sacrifice in order that his child shall receive this added education. I hate to mention it, but there is undoubtedtly a distinction drawn between the people to whom this allowance means nothing and poor men, many of whom I know are making tremendous sacrifices in order that their children shall not enter blind-alley occupations.
In places where armaments are being made there is a surplus of unskilled labour and a very definite shortage of skilled labour. One of the things which we have to face in this age of mechanisation is the problem that we are turning people into automatons. I do not say that in any sneering way. When I see people at jobs which really do not demand much skill but which involves a terrible monotony,

I do not wonder that they go to the pictures in order to have some kind of diversion from a horrible monotony. I am surprised at the mildness of the Amendment. I should have drawn it in much wider terms because it will assist very few people indeed. Surely we can give some encouragement to poor working people who in areas mentioned by the hon. Member for Hemsworth (Mr. G. Griffiths) have been unemployed or on short time for so long that as soon as a child is of an age to earn a few shillings, off he or she goes to work. I am not criticising these people, I know what necessity means. If there are a few pounds of Income Tax to pay they cannot send their children to get this further education, but if we give them this small allowance it will be a tremendous encouragement to them to allow their children to continue in some kind of further education.
I cannot understand why the Government should decline to accept the Amendment. I am sorry that the Amendment to which I have already referred, and which is much wider in its scope, is not to be called, but I appeal to the Government to encourage these people to allow their children to equip themselves for the years after they reach manhood and womanhood. For the sake of a few shillings a week the prospects of many a child in after life will be jeopardised. I can conceive of no better way than this for the State to spend money. We have had to-day the copy of a Bill every Clause of which contains proposals for the Government to give a subsidy to this and that and a grant to this and to the other. Surely a mere £100,000 or even £200,000 in order to equip the nation with a better educated manhood and womanhood is the best expenditure we can make. When we compare the statement in the OFFICIAL REPORT that the total of subsidies of one kind and another amounts to £130,000,000 a year, with the amount involved in this Amendment, it is a mere quibble to talk about refusing such an amount in such a case. I hope the Government will, before the Report stage, give the matter further consideration. If not, and if a Division is called, it will give me great pleasure to support the Amendment in the Lobby.

8.41 p.m.

Mr. G. Macdonald: The Chancellor of the Exchequer has made no attempt to


put up a case against the Amendment. He said that he was sorry, and that if he granted the concession it might lead to further concessions later on. That is a very unfair way of dealing with it. Surely it should be considered on its merits? We have been criticised for the modesty of our proposals. If we are guilty on that ground, then the Chancellor of the Exchequer is even more guilty in rejecting it. I think the two paragraphs are very modest:
a child is required to devote the whole of his time to the training for a period of not less than two years; and
the emoluments, if any, receivable by, or payable by the employer in respect of the child while undergoing the training, do not exceed thirteen pounds a year.
It has been suggested that we have class legislation. I have met it in my own home. I have two sons, one at a university and the other under this kind of training. The lad at the university is five years the senior of the other boy, and like boys they sometimes quarrel among themslves. They say, why should their father get an allowance for the one at the university and not for the other? The younger lad says that he will make a better job of life than his elder brother, and he tells me that every week-end. Surely this state of affairs cannot be justified. Because the bent of the younger boy is technical and of his brother literature, why should the law make a difference between the two? I want some defence for the position which the Government take up, not merely a statement that it is going to cost £2,000,000. I am astonished that the Chancellor of the Exchequer should argue on those lines. It is a very modest proposal. We could have made it far wider, but we did not want to do that. We wanted to put this one matter right. Boys ought not to be made to feel this distinction at all, and the sooner this House tells a boy who is of a technical bent of mind that he will be treated in the same way as a boy who goes to a university, the better. That is all we are asking, and I hope the Government will make some attempt at a defence of their position.

8.45 p.m.

Mr. Sexton: I want to pay my tribute to the hon. Member for having brought this matter forward. Something has been said about the deplorable loss of apprentices. Key-men in all industries to-day

are the scarcest of all men, and the reason why they are scarce is that fewer boys are now becoming apprentices. They a re rather going into blind-alley employment. The future of industry in this and in all countries depends on the training. That fundamental training is undergone not only in the ordinary schools, colleges and universities, but in the workshops in a vocational line. The children of the workers who have low wages but who are just within the Income Tax limit, will not be of any benefit unless they are allowed to enter those vocations and their parents are assisted by these deductions in Income Tax. Well-to-do parents who are well able to afford to pay Income Tax receive the deductions for their children. Children of 14 years of age are hauled out of the elementary schools, and many of them wish to go on to continued education in various educational establishments which are not of the school and college kind, but more of a technical nature.
Not only is it wise for the industry of the country to train these boys and girls in craftsmanship, but in future, in this mechanical age, there will be a big problem of spending leisure wisely and well. If we train our boys and girls and give them a chance in these vocational centres, then when they get the leisure hours which will come to them as the mechanical age goes on, they will be able to spend their leisure wisely and well. I am sure that every Member of the Committee believes that workshops are as important as universities. The people who are able to pay their Income Tax and have a bit left over can send their children to Eton, Harrow and Rugby, and receive deductions from Income Tax as long as their children remain at those schools; but the Government evidently are unwilling to give any assistance to the parents of children who go to evening establishments and technical training schools and colleges.
The workers of the country have for years made sacrifices in order that their children might be able to go to secondary schools. The Government ask those people to go on making sacrifices, although they have the opportunity to-night to help them. Craftsmanship is as important as the classics, to work at the bench is as dignified as to work at the Bar, to work in the laboratory is equivalent to working at the law, and mechanics are as valuable as medicine. Therefore, I


appeal to the Chancellor to grant this concession. There may be parallel cases which would cost £2,000,000, but if there are, and if they are as worthy as this case is, the £2,000,000 would be well spent.

8.49 p.m.

Mr. Kelly: I appeal to the Government to agree to the proposed new Clause. The request contained in it is a modest one, and I wish it were much wider than is proposed. I am surprised that the Government, which has set up juvenile advisory councils throughout the country and has asked many of us who have been, and still are, engaged in that work, to place these boys and girls in trades and occupations where they have to begin at a very low wage and where they have to continue their training, should refuse to accede to our request. In London, for many years, we have been endeavouring to prevail upon employers to allow some of the children who are serving apprenticeships to attend classes, which we should be quite prepared to set up, on two half-days a week. Sometimes the parents make great sacrifices in order that their children may have such training. When one considers the fares that have to be paid in London, one is amazed at the sacrifices that the parents make in order that their children may have a chance. So serious is the question of fares for these parents that we have tried, as questions in the House have shown, to secure for these young people cheaper fares on the railways and on the London Passenger Transport system. These parents are receiving only a few pounds a week. They send their children to that wonderful engineering school at Poplar, to which the right hon. Gentleman the Member for Bow and Bromley (Mr. Lansbury) has referred, and if the Government realised the difficulty that the parents have in keeping their children there long enough to complete their apprenticeship, I am sure that even they, thinking in terms of money as they do, would feel compelled to agree to the proposal.
It is not only the fares that are a difficulty, but also the buying of the things that are needed in order that the young people may engage in the training. There are many people I could name at this moment who have spent very much time in endeavouring to help

these young people whose parents could not afford to provide them with the elementary tools and books. To-day great efforts are being made, not only in London but in all parts of the country, to give bays and girls the opportunity of serving apprenticeships in order that they may become fully qualified craftsmen and tradesmen. I urge the Government to accede to this request. I wish there were somebody on the Government Front Bench who, like many hon. Members on these benches, had had to serve apprenticeships between the ages of 14 years and 21 years before they became journeymen. If right hon. Gentlemen on the Front Bench opposite knew the hardships of that time, not only of the parents but of the young people, we should not now be asking them to accede to this request, for they would themselves have come to the rescue of the parents.
I ask the Government to agree to the proposed Clause for the sake of the young people. The Minister of Labour is not present at the moment, but he has urged that this work should be undertaken and that more and more of these boys and girls should be placed in these occupations with low wages, and great expenses attaching to them. Let hon. Members consider how these young people have to travel from the South-East of London to the North West, and in many cases from the West to the East and into the outer parts of London. How the parents manage to afford it from their small income and at the same time to pay Income Tax to His Majesty's Government, I do not understand. The President of the Board of Education and the Minister of Labour ought to be with us in this demand and to insist that the Exchequer should concede what is asked for in the proposed new Clause.

Sir Robert Tasker: Will the hon. Member explain why the trade unions are opposed to children becoming apprentices?

Mr. Kelly: Trade unions do not oppose apprenticeships. The trade unions have agreed that a period at school, providing that the training is in the direction of the industry into which the children are going, shall be counted as 50 per cent. of the time served in apprenticeship.

8.54 p.m.

Sir Joseph Lamb: I should be very sorry if it were thought from what has


been said by hon. Members opposite that support for the object of the proposed new Clause comes entirely from the opposite side. There is a great deal of support, not only in the Committee but also in the country, for this object. I take it that the object is to give fair treatment to those who are receiving manual education and technical education, that is to say, to give them assistance which is equivalent to the assistance that is given to those receiving instruction in what might be termed the purely academic subjects. Although £2,000,000 seems a lot of money, I believe it would be well-spent in the interest of the community as a whole if we were to use it to give the same assistance in respect of technical education as is now given in respect of other types of education. I say nothing derogatory about classical education. For those who are entering professions it is possibly the best type of education that can be given, but 80 to 90 per cent. of our people will ultimately earn their living by their hands, and for them technical education is all-important. When you create something with your own hands you stimulate a sense of the importance and dignity of manual work, and that spirit ought to be encouraged, as it can be encouraged, by improving the technical side of education.
One of the tragedies of to-day is, that there has been a loss of the sense of dignity which ought to attach to manual labour. From several causes which I shall not go into now, because this is not an education Debate, we have come to look upon manual work as menial. I believe that whatever can be done to encourage the type of education referred to in this proposal, ought to be done without hesitation. One of the problems today in connection with the improvement in trade is a lack of skilled workers, and I believe that problem will grow more serious, unless something effective is done for the advance of technical education. I did not come here prepared to speak on this subject, but after what I heard from the benches opposite, I wished to express a view which I know is widely held on this side of the Committee. This is not a party question and I do not desire to make any party advantage out of it. I suggest that if this is not the right time or the right way to deal with the matter, the Chancellor of the Exchequer ought to say that while unable to accept the

present proposal, he is prepared to deal with the matter in some other way and give adequate assistance in respect of what is, to my mind, the most important type of education.

8.59 p.m.

The Attorney-General: The Committee, I am sure, appreciates the fact that my right hon. Friend the Chancellor of the Exchequer cannot be present during every discussion on every proposal. They will also appreciate the position in which I find myself. I think it right that I should intervene at this stage to say something with regard to the speeches that have been made since my right hon. Friend spoke earlier. My right hon. Friend made it clear that, in this matter, there is no lack of sympathy on the part of the Government with technical education. Indeed, hon. Members opposite have themselves referred to the encourgement which the Government are giving to technical education and our attitude on this Amendment is not due to any failure to appreciate the importance of technical education or to recognise the value of the learning and the equipment which a boy gains as the result of apprenticeship. But as my right hon. Friend said—and one has to face this fact—the general Income Tax structure, at any given moment, must contain anomalies and, as between individual and individual, must, in some cases, press more hardly on one than on another.
A question was raised by the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) as to what my right hon. Friend had in mind when he said that there was reason to believe that the concession which is asked for here might, reasonably and logically, be made the basis of a demand for further concessions. The principle behind the proposed Clause is that where, in respect of a child over 16, sacrifices are being made in order that the child may be better equipped or may get work of a better class, work more beneficial to him and to the community, that that fact should be reflected in the Income Tax allowances.

Mr. Lansbury: Would the hon. and learned Gentleman when dealing with this question take note of paragraph (b) in the proposed Clause. My hon. Friends who hate a means test probably as much as anybody, have there put in a means


test. Will the hon. and learned Gentleman tell me, in view of that means test, who are the people and where they come from, who are to bring the £100,000 cost up to £2,000,000?

The Attorney-General: I was at the moment dealing: with a different point. I was trying to answer the question put by the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) and perhaps the right hon. Gentleman will allow me to do so.

Mr. Lansbury: It is the same question.

Mr. Lees-Smith: I thought I was putting the same question.

The Attorney-General: I understood that the right hon. Gentleman the Member for Bow and Bromley (Mr. Lansbury) was asking about the £100,000 which was referred to earlier.

Mr. Lansbury: I am asking where the additional number of people will come from, to bring the cost up to £2,000,000.

The Attorney-General: If the right hon. Gentleman heard my right hon. Friend's speech——

Mr. Lansbury: I did.

The Attorney-General: And if he heard what my right hon. Friend said subsequently, he must realise that the figure of £2,000,000 to which he referred, did not relate to those who would be affected by the Clause, but to persons who would, he suggested, if this Clause were passed——

Mr. Lansbury: Tell us who they are.

The Attorney-General: Perhaps the right hon. Gentleman will allow me to finish my sentence. My right hon. Friend made it clear that those who made up the figure to which he referred were not those who would be included in the scope of this Clause—and therefore that has nothing to do with paragraph (b) of the Clause—but were those who might, on the same basis as this Clause, claim a similar concession. There are really two different questions involved and it was that question which I thought the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) was putting to me. As I was saying, I think the principle of the proposal is this: that

any one who incurs financial sacrifices in respect of a child over 16, whether by way of paying apprenticeship fees, or not allowing the child to go into a blind-alley occupation and possibly keeping the child unemployed until a -good opening occurred, should be able to claim recognition of those sacrifices in the Income Tax exemptions. That is the general class of persons to whom my right hon. Friend was referring. I would be the last person to suggest and I do not think any Member of any Government would suggest that you can justify on logical and ethical principles, all instances of Income Tax law at any given time. Human ingenuity could not devise a code which would not in its application, in some cases, bear more hardly on some one who was making sacrifices not only for the good of his family but for the national good and less hardly on somebody else who was leading a much more selfish life. The principle of the present exemption is to take education in the ordinary sense of the word.

Mr. Holdsworth: What is the ordinary sense of the word?

The Attorney-General: It may be that it is a wrong sense of the word. It may be that at this moment we are revising our opinion, in the light of more enlightened ideas, as to what should be the proper sense of the word. Education in the ordinary sense of the word does not, of course, include apprenticeship. No one disputes that we can go on educating ourselves all our lives, and in that sense there is educational value in apprenticeship.

Mr. Holdsworth: On the question of ordinary education, suppose there is a young fellow from Bradford who goes to a university and takes a mechanical course. There is relief in respect of his education. If the son of an ordinary workman gets his mechanical education in another way, there is no relief. Both young fellows, however, are following in a degree the same sort of education.

The Attorney-General: I agree; I do not want to be controversial. I spent my university career getting an education as a chemist. There is no doubt that if I had wanted to go into an industrial course, I would afterwards have had to spend a considerable period in a works


before I should have been of any use to the employer. If, however, I had spent those years in a works to start with, I should obviously have reached at an earlier age a position in which I could hope to have earned something. There is undoubtedly something in the distinction which is drawn in the present day. I do not qualify in any way what my right hon. Friend says about the attitude of the Government to this new Clause. The hon. Gentlemen opposite will, of course, take what action they think proper. I have endeavoured to answer some of the questions which have been put and to state the grounds why we cannot support the Clause.

Mr. Lansbury: The hon. and learned Gentleman has not met my point. Will he tell us the number of children who might come up if the new Clause is passed?

The Attorney-General: My right hon. Friend said that he has not the figures, and I have not them either. An hon.

Member opposite said that on a previous Debate on this question the figure of £100,000 was mentioned, but I am afraid that I cannot give the figures.

Mr. Lansbury: I want to protest against the manner in which figures are thrown at us on this question. The statement is made that what we ask for would cost £100,000. No one challenges that, and the Attorney-General has not challenged it. He said, however, that there might be other cases, if this provision was carried, which would swell the cost to £2,000,000 a year. What I have been asking is, where are these children who will come along under paragraph (b) and cause the cost to rise in this way? I challenge the Treasury or anyone in the Department to find them. They do not exist, and it is scandalous that we should be put off with a statement of cost without any justification for it.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 133; Noes, 165.

Division No. 251.]
AYES.
[9.11 p.m.


Acland, R. T. D. (Barnstaple)
Griffith, F. Kingsley (M'ddl'sbro, W.)
Montague, F.


Adams, D. (Consett)
Griffiths, G. A. (Hemsworth)
Morrison, G. A. (Scottish Univ's.)


Adams, D. M. (Poplar, S.)
Griffiths, J. (Llanelly)
Morrison, Rt. Hon. H. (Hackney, S.)


Adamson, W. M.
Groves, T. E.
Morrison, R. C. (Tottenham, N.)


Alexander, Rt. Hon. A. V. (H'lsbr.)
Hall, G. H. (Aberdare)
Naylor, T. E.


Ammon, C. G.
Hall, J. H. (Whitechapel)
Noel-Baker, P. J.


Aske, Sir R. W.
Harris, Sir P. A.
Oliver, G. H.


Attlee, Rt. Hon. C. R.
Henderson, J. (Ardwick)
Paling, W.


Banfield, J. W.
Henderson, T. (Tradeston)
Parker, J.


Barr, J.
Hills, A. (Pontefract)
Parkinson, J. A.


Batey, J.
Holdsworth, H.
Pethick-Lawrence, Rt. Hon. F. W.


Bellenger, F. J.
Hollins, A.
Price, M. P.


Benn, Rt. Hon. W. W.
Hopkin, D.
Pritt, D. N.


Broad, F. A.
Jagger, J.
Quibell, D. J. K.


Brown, C. (Mansfield)
Jenkins, A. (Pontypool)
Ridley, G.


Brown, Rt. Hon. J. (S. Ayrshire)
Jenkins, Sir W. (Neath)
Riley, B.


Burke, W. A.
John, W.
Ritson, J.


Cape, T.
Johnston, Rt. Hon. T.
Robinson, W. A. (St. Helens)


Chater, D.
Jones, A. C. (Shipley)
Rowson, G.


Clarry, Sir Reginald
Jones, Morgan (Caerphilly)
Salter, Dr. A. (Bermondsey)


Cluse, W. S.
Kelly, W. T.
Sanders, W. S.


Clynes, Rt. Hon. J. R.
Kennedy, Rt. Hon. T.
Sexton, T. M.


Cocks, F. S.
Kirby, B. V.
Silkin, L.


Cove, W. G.
Kirkwood, D.
Simpson, F. B.


Cripps, Hon. Sir Stafford
Lamb, Sir J. Q.
Smith, Ben (Rotherhithe)


Daggar, G.
Lansbury, Rt. Hon. G
Smith, E. (Stoke)


Davies, R. J. (Westhoughton)
Lathan, G.
Smith, Rt. Hon. H. B. Lees- (K'ly)


Davies, S. O. (Merthyr)
Lawson, J. J.
Smith, T. (Normanton)


Day, H.
Leach, W.
Sorensen, R. W.


Dobbie, W.
Lee, F.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Dunn, E. (Rother Valley)
Leonard, W.
Strauss, G. R. (Lambeth, N.)


Ede, J. C.
Leslie, J. R.
Taylor, R. J. (Morpeth)


Edwards, Sir C. (Bedwellty)
Lunn, W.
Thurtle, E.


Evans, D. O. (Cardigan)
Macdonald, G. (Ince)
Tinker, J. J.


Evans, E. (Univ. of Wales)
McEntee, V. La T.
Viant, S. P.


Foot, D. M.
McGhee, H. G.
Walkden, A. G.


Gardner, B. W.
MacLaren, A.
Walker, J.


Garro Jones, G. M.
Maclean, N.
Watkins, F. C.


Gibson, R. (Greenock)
MacMillan, M. (Western Isles)
Watson, W. McL.


Graham, D. M. (Hamilton)
Mainwaring, W. H.
Welsh, J. C.


Green, W. H. (Deptford)
Marshall, F.
Westwood, J.


Greenwood, Rt. Hon. A.
Messer, F.
Whiteley, W. (Blaydon)


Grenfell, D. R.
Milner, Major J.
Wilkinson, Ellen




Williams, T. (Don Valley)
Woods, G. S. (Finsbury)
TELLERS FOR THE AYES.—


Windsor, W. (Hull, C.)
Young, Sir R. (Newton)
Mr. Charleton and Mr. Mathers.




NOES.


Acland-Troyte, Lt.-Col, G. J.
Gledhill, G.
Petherick, M.


Adams, S. V. T. (Leeds, W.)
Gluckstein, L. H.
Pilkington, R.


Agnew, Lieut.-Comdr. P. G.
Goldie, N. B.
Ponsonby, Col. C. E.


Albery, Sir Irving
Goodman, Col. A. W.
Procter, Major H. A.


Anstruther-Gray, W. J.
Gower, Sir R. V.
Radford, E. A.


Apsley, Lord
Grant-Ferris, R.
Raikes, H. V. A. M.


Baillie, Sir A. W. M.
Grimston, R. V.
Ramsay, Captain A. H. M.


Baldwin-Webb, Col. J.
Gritten, W. G. Howard
Ramsbotham, H.


Balfour, G. (Hampstead)
Guest, Lieut.-Colonel H. (Drake)
Rayner, Major R. H.


Balfour, Capt. H. H. (Isle of Thanet)
Guest, Maj. Hon. O. (C'mb'rw'll, N.W.)
Reid, J. S. C. (Hillhead)


Beauchamp, Sir B. C.
Guinness, T. L. E. B.
Reid, W. Allan (Derby)


Beaumont, Hon. R. E. B. (Portsm'h)
Gunston, Capt. D. W.
Rickards, G. W. (Skipton)


Boyce, H. Leslie
Guy, J. C. M.
Ropner, Colonel L.


Brass, Sir W.
Hannah, I. C.
Ross, Major Sir R. D. (Londonderry)


Brocklebank, Sir Edmund
Hannon, Sir P. J. H.
Ross Taylor, W. (Woodbridgs)


Brown, Rt. Hon. E (Leith)
Haslam, Sir J. (Bolton)
Rowlands, G.


Brown, Brig.-Gen. H. C. (Newbury)
Heilgers, Captain F. F. A.
Russell, S. H. M. (Darwen)


Butcher, H. W.
Hepburn, P. G. T. Buchan-
Salmon, Sir I.


Carver, Major W. H.
Hepworth, J.
Samuel, M. R. A.


Cary, R. A.
Herbert, Major J. A. (Monmouth)
Savery, Sir Servington


Cayzer, Sir H. R. (Portsmouth, S.)
Higgs, W. F.
Scott, Lord William


Chamberlain, Rt. Hn. N. (Edgb't'n)
Hills, Major Rt. Hon. J. W. (Ripon)
Selley, H. R.


Clarke, Lt.-Col. R. S. (E. Grinstaad)
Horsbrugh, Florence
Shakespeare, G H


Cobb, Captain E. C. (Preston)
Hume, Sir G. H,
Shaw, Major P. S. (Wavertree)


Colville, Lt.-Col. Rt. Hon. D. J.
Hunter, T.
Shaw, Captain W. T. (Forfar)


Conant, Captain R. J, E.
Hutchinson, G. C.
Simon, Rt. Hon. Sir J. A.


Cock, Sir T. R. A. M. (Norfolk, N.)
Keeling, E. H.
Smith, Bracewell (Dulwich)


Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Kerr, J. Graham (Scottish Univs.)
Smith, Sir R. W. (Aberdeen)


Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Law, R. K. (Hull, S.W.)
Somervell, Sir D. B. (Crewe)


Cox, H. B. T.
Leckie, J. A.
Somerville, A. A. (Windsor)


Cranborne, Viscount
Lees-Jones, J.
Southby, Commander Sir A. R. J.


Croft, Brig.-Gen. Sir H. Page
Leighton, Major B. E. P.
Spens. W. P.


Crooke, J. S.
Liddall, W. S.
Strauss, H. G. (Norwich)


Crookshank, Capt. H. F. C.
Llewellin, Lieut.-Col. J. J.
Strickland, Captain W. F.


Cross, R. H.
Loftus, P. C.
Stuart, Hon. J. (Moray and Nairn)


Crossley, A. C.
Lovat-Fraser, J. A.
Sutcliffe, H.


Crowder, J. F, E
Lyons, A. M.
Tasker, Sir R. I.


Cruddas, Col. B.
Mabane, W. (Huddersfield)
Thomas, J. P. L.


Dawson, Sir P.
MacAndrew, Colonel Sir C. G.
Thomson, Sir J. D. W.


Denville, Alfred
McCorquodale, M. S.
Touche, G. C.


Dixon, Capt. Rt. Hon. H
Macdonald, Capt. P. (Isle of Wight)
Turton, R. H.


Donner, P. W.
Macnamara, Capt. J. R. J.
Wakefield, W. W.


Dower, Major A. V. G.
Magnay, T.
Wallace, Capt. Rt. Hon. Euan


Drewe, C.
Maitland, A.
Watt, G. S. H.


Duckworth, W R. (Moss Side)
Makins, Brig.-Gen. E.
Wayland, Sir W. A


Dugdale, Captain T. L.
Manningham-Buller, Sir M.
Wedderburn, H. J. S.


Duncan, J. A. L,
Margesson, Capt. Rt. Hon. H. D. R.
Wickham, Lt.-Col. E. T. R.


Eastwood, J. F.
Mayhew, Lt.-Col. J.
Williams, H. G. (Croydon, S.)


Edmondson, Major Sir J.
Mellor, Sir J. S. P. (Tamworth)
Windsor-Clive, Lieut.-Colonel G.


Ellis, Sir G.
Mills, Sir F. (Leyton, E.)
Womersley, Sir W. J.


Entwistle, Sir C. F.
Mills, Major J. D. (New Forest)
Wood Rt. Hon. Sir Kingsley


Erskine-Hill, A. G.
Muirhead, Lt.-Col. A. J.
Wright, Squadron-Leader J. A. C.


Everard, W L.
Munro, P.
Young, A. S. L. (Partick)


Fildes, Sir H.
Neven-Spence, Major B. H, H.



Fremantle, Sir F. E.
Peat, C. U.
TELLERS FOR THE NOES.—


Ganzoni, Sir J.
Peters, Dr. S. J.
Captain Waterhouse and Mr. Furness.

NEW CLAUSE.—(Allowance in respect of earned incomes.)

Section fifteen of the Finance Act, 1925 (which, as amended by Section eight of the Finance (No. 2) Act, 1931, makes provision for an allowance in respect of earned incomes), shall have effect as if the word "one-fourth" were substituted for the word "one-fifth."[Mr. Lees-Smith.]

Brought up and read the First time.

9.19 p.m.

Mr. Lees-Smith: I beg to move, "That the Clause be read a Second time." In moving this Clause I wish to call attention to the present differentiation

between the allowances on earned incomes and unearned incomes in respect of Income Tax. At present the recipient of an earned income is allowed an abatement of one-fifth as against the recipient of an unearned income, and this new Clause proposes to increase the abatement to one-fourth in the case of earned income. As an illustration of how the law works at present let me take the example of a doctor earning, say, £600 a year. He would be paying the same amount in Income Tax as a man living on dividends and obtaining from them


an income of £480 a year. This new Clause is put forward with the view that there is really an insufficient distinction between the allowances to the two men if we take their real financial position into account. To begin with, the income of the doctor is a precarious income. It disappears if he falls ill, and also when he retires. A large part of it has to be spent upon insurance. The man receiving £480 a year from dividends does not, to begin with, have to insure—that is a big difference right away. His income is not precarious, it goes on. If he dies it continues for his dependants. If he falls ill it goes on. It goes on when he is asleep and when he is awake. He has the whole of his time free for other occupations.
If we take all these facts into account it is not the case that a man with all the changes and chances of life to contend with earning £600 a year is as well off as a man with an unearned income of £480 a year. To see the distinction between the two cases—I admit is not a complete illustration—one ought to consider what is their capital. In the case of a doctor who is earning £600 a year, his capital is represented by two or three years' purchase. His capital is really between £1,200 and £1,600. A man who has an unearned income of £480 a year has a capital, calculating it on a 3½ per cent. basis, of about £14,000. That shows the great difference in the stability of the two incomes. In view of the whole history of Income Tax this Clause suggests a very moderate amendment of the law. When I first began to pay Income Tax—on a smaller income—I was allowed a deduction of one-third, as it was earned income. That was the position for many years. Then one year, after very little debate in this House—I looked up the Debate—the rate of abatement was suddenly changed from one-third to one-tenth.
That, to my mind, was a great mistake, and Parliament has been retracing its steps ever since. I find that in one year they changed the one-tenth to one-sixth. Then under the last Labour administration the one-sixth was changed to one-fifth. I have no doubt that some day it will go back to one-third, and as a first step towards that I make this proposal of one-quarter. An immense addition to this argument has been made by the discussions on the National Defence Con-

tribution because one of the arguments used over and over again against its original form was that it was a tax on enterprise, youth and progress in industry. A tax on unearned income is a tax on the passive, rentier section; a tax on earned income is a tax on the vital part of industry. Therefore, both on grounds of justice and of common sense in taxation, I move this new Clause.

9.27 p.m.

Lieut.-Colonel Colville: The right hon. Gentleman has moved this Clause in his usual persuasive way, and in temperate language, but I feel bound to dispute one or two of his contentions. He thinks that the present allowance of one-fifth does not make a sufficient distinction between earned and unearned income. I ask the Committee to remember that when we speak generally of unearned income we often refer to the interest on the savings of a lifetime of work, and it should not be forgotten that there are many people in this country whose income is all technically unearned, but who have toiled throughout their working years to save up the money to provide them with that income, and when the right hon. Gentleman urges that we should make a further distinction between earned and unearned income, I hope that that consideration will be fully borne in mind by the Committee. Let me say a word or two on the history of this allowance since 1920. The Royal Commission on the Income Tax recommended in that year that the allowance should be one-tenth and that was adopted in the Finance Act, 1920. That was in operation from 1920 to 1925. In 1925 it was increased to one-sixth. In 1931 it was again increased to one-fifth, thus abating in favour of the earned Income Tax payer the increase in liability arising from the 6d. increase in the standard rate and the cuts in the personal allowances which were made at that time.
It has been left unaltered at that figure, although the adjustments made in the Finance Acts of 1935 and 1936 have removed in the case of the small income a large part of the additional burden which it was found necessary to impose in 1931 and, although now the standard rate is at 5s. again, the earned income taxpayer is considerably better off than he was under the second Finance Act of 1931, for he has higher personal allowances; and this is specially true of the small earned incomes,


which now pay at only one-third of the standard rate. I therefore claim that the history of this allowance goes to show that the present rate of one-fifth is not ungenerous. There is a cogent reason why I cannot accept this Clause, and that is that it would be very expensive from the revenue point of view. In the first year it would cost between £3,000,000 and £4,000,000, and in a full year it would cost about £7,500,000. So, bearing in

mind the high cost to the Exchequer in a year when it is generally admitted that, we have great demands to meet, and also the contention that we should not speak too loosely of unearned income, I consider that the present rate should be adhered to, and I cannot accept the Clause.

Question put, "That the Clause be read a Second time.

The Committee divided: Ayes, 128; Noes, 177.

Division No. 252.]
AYES.
9.31 p.m.


Acland, R. T. D. (Barnstaple)
Griffiths, G. A. (Hemsworth)
Oliver, G. H.


Adams, D. (Consett)
Griffiths, J. (Llanelly)
Paling, W.


Adams, D. M. (Poplar, S.)
Groves, T. E.
Parker, J.


Adamson, W. M.
Hall, G. H. (Aberdare)
Parkinson, J. A.


Alexander, Rt. Hon. A. V. (H'lsbr.)
Hall, J. H. (Whitechapel)
Pethick-Lawrence, Rt. Hon. F. W.


Ammon, C. G.
Harris, Sir P. A.
Price, M. P.


Attlee, Rt. Hon. C. R.
Henderson, J. (Ardwick)
Pritt, D. N.


Banfield, J. W.
Henderson, T. (Tradeston)
Quibell, D. J. K.


Barr, J.
Hills, A. (Pontefract)
Ridley, G.


Batey, J.
Hollins, A.
Riley, B.


Bellenger, F. J.
Hopkin, D.
Ritson, J.


Benn, Rt. Hon. W. W.
Jagger, J.
Robinson, W. A. (St. Helens)


Broad, F. A.
Jenkins, A. (Pontypool)
Rowson, G.


Brown, C. (Mansfield)
Jenkins, Sir W. (Neath)
Salter, Dr. A. (Bermondsey)


Brown, Rt. Hon. J. (S. Ayrshire)
John, W.
Sanders, W. S.


Burke, W. A.
Johnston, Rt. Hon. T.
Sexton, T. M.


Cape, T.
Jones, A. C. (Shipley)
Silkin, L.


Charleton, H. C.
Jones, Morgan (Caerphilly)
Simpson, F. B.


Chater, D.
Kelly, W. T.
Smith, Ben (Rotherhithe)


Cluse, W. S.
Kennedy, Rt. Hon. T.
Smith, E. (Stoke)


Clynes, Rt. Hon. J. R.
Kirby, B. V.
Smith, Rt. Hon. H. B. Lees- (K'ly)


Cocks, F. S.
Kirkwood, D.
Smith, T. (Normanton)


Cove, W. G.
Lansbury, Rt. Hon. G.
Sorensen, R. W.


Cripps, Hon. Sir Stafford
Lathan, G.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Daggar, G.
Lawson, J. J.
Strauss, G. R. (Lambeth, N.)


Davies, R. J. (Westhoughton)
Leach, W.
Taylor, R. J. (Morpeth)


Davies, S. O. (Merthyr)
Lee, F.
Thurtle, E.


Day, H.
Leonard, W.
Tinker, J. J.


Dobbie, W.
Leslie, J. R.
Viant, S. P.


Dunn, E. (Rother Valley)
Lunn, W.
Walkden, A. G.


Ede, J. C.
McEntee, V. La T.
Walker, J.


Edwards, Sir C. (Bedwellty)
McGhee, H. G.
Watkins, F. C.


Evans, D. O. (Cardigan)
MacLaren, A.
Watson, W. McL.


Evans, E. (Univ. of Wales)
Maclean, N.
Welsh, J. C.


Foot, D. M.
MacMillan, M. (Western Isles)
Westwood, J.


Gallacher, W.
Mainwaring, W. H.
Wilkinson, Ellen


Gardner, B. W.
Marshall, F.
Williams, T. (Don Valley)


Garro Jones, G. M.
Maxton, J.
Windsor, W. (Hull, C.)


Gibson, R. (Greenock)
Messer, F.
Woods, G. S. (Finsbury)


Graham, D. M. (Hamilton)
Montague, F.
Young, Sir R. (Newton)


Green, W. H. (Deptford)
Morrison, Rt. Hon. H. (Hackney, S.)



Greenwood, Rt. Hon. A.
Morrison, R. C. (Tottenham, N.)
TELLERS FOR THE AYES.—


Grenfell, D. R.
Naylor, T. E.
Mr. Whiteley and Mr. Mathers.


Griffith, F. Kingsley (M'ddl'sbro, W.)
Noel-Baker, P. J.





NOES.


Acland-Troyte, Lt.-Col. G. J.
Brown, Brig.-Gen H. C. (Newbury)
Croft, Brig.-Gen. Sir H. Page


Adams, S. V. T. (Leeds, W.)
Butcher, H. W.
Crooke, J. S.


Agnew, Lieut.-Comdr. P. G.
Carver, Major W. H.
Crookshank, Capt. H. F. C.


Albery, Sir Irving
Cary, R. A.
Cross, R. H.


Anstruther-Gray, W. J.
Castlereagh, Viscount
Crossley, A. C.


Apsley, Lord
Cayzer, Sir H. R. (Portsmouth, S.)
Crowder, J. F. E.


Aske, Sir R. W.
Chamberlain, Rt. Hn. N. (Edgb't'n)
Cruddas, Col. B.


Baillie, Sir A. W. M.
Clarke, Lt.-Col. R. S. (E. Grinstead)
Dawson, Sir P.


Baldwin-Webb, Col. J.
Cobb, Captain E. C. (Preston)
Denville, Alfred


Balfour, G. (Hampstead)
Colville, Lt.-Col. Rt. Hon. D. J.
Dixon, Capt. Rt. Hon. H.


Balfour, Capt. H. H. (Isle of Thanet)
Conant, Captain R. J. E.
Donner, P. W.


Beauchamp, Sir B. C.
Cook, Sir T. R. A. M. (Norfolk, N.)
Dower, Major A. V. G.


Beaumont, Hon. R. E. B. (Portsm'h)
Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Drewe, C.


Boyce, H. Leslie
Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Duckworth, W. R. (Moss Side)


Brass, Sir W.
Cox, H. B. T.
Dugdale, Captain T. L.


Brocklebank, Sir Edmund
Cranborne, Viscount
Duncan, J. A. L.


Brown, Rt. Hon. E. (Leith)
Craven-Ellis, W.
Eastwood, J. F.




Edmondson, Major Sir J.
Lovat-Fraser, J. A.
Salmon, Sir I.


Ellis, Sir G.
Lyons, A. M.
Samuel, M. R. A.


Elliston, Capt. G. S.
Mabane, W. (Huddersfield)
Sanderson, Sir F. B.


Entwistle, Sir C. F.
MacAndrew, Colonel Sir C. G.
Savery, Sir Servington


Erskine-Hill, A. G.
McCorquodale, M, S.
Scott, Lord William


Everard, W. L.
MacDonald, Rt. Hon. M. (Ross)
Selley, H. R.


Fildes, Sir H.
Macdonald, Capt. P. (Isle of Wight)
Shakespeare, G. H.


Fremantle, Sir F. E.
Macnamara, Capt. J. R. J.
Shaw, Major P. S. (Wavertree)


Ganzoni, Sir J.
Magnay, T.
Shaw, Captain W. T. (Forfar)


Gledhill, G.
Maitland, A,
Simon, Rt. Hon. Sir J. A.


Gluckstein, L. H.
Makins, Brig.-Gen. E.
Smith, Bracewell (Dulwich)


Goldie, N. B.
Manningham-Buller, Sir M.
Smith, Sir R. W. (Aberdeen)


Gower, Sir R. V.
Margesson, Capt. Rt. Hon. H. D. R.
Somervell, Sir D. B. (Crewe)


Grant-Ferris, R.
Mayhew, Lt.-Col. J.
Somerville, A. A. (Windsor)


Gritten, W. G. Howard
Mellor, Sir J. S. P. (Tamworth)
Southby, Commander Sir A. R. J.


Guest, Lieut.-Colonel H. (Drake)
Mills, Sir F. (Leyton, E.)
Spens, W. P.


Guest, Maj. Hon. O. (C'mb'rw'll, N.W.)
Mills, Major J. D. (New Forest)
Strauss, H. G. (Norwich)


Guinness, T. L. E. B.
Morrison, G. A. (Scottish Univ's.)
Strickland, Captain W. F.


Gunston, Capt. D. W.
Muirhead, Lt.-Col. A. J.
Stuart, Hon. J. (Moray and Nairn)


Guy, J. C. M.
Munro, P.
Sutcliffe, H.


Hannah, I. C.
Neven-Spence, Major B. H. H.
Tasker, Sir R. I.


Hannon, Sir P. J. H.
Ormsby-Gore, Rt. Hon. W. G. A.
Thomas, J. P. L.


Haslam, Sir J. (Bolton)
Orr-Ewing, I. L.
Thomson, Sir J. D. W.


Heilgers, Captain F. F. A.
Peat, C. U.
Touche, G. C.


Hepburn, P. G. T. Buchan-
Peters, Dr. S. J.
Tufnell, Lieut.-Commander R. L.


Hepworth, J.
Petherick, M.
Turton, R. H.


Herbert, Major J. A. (Monmouth)
Pilkington, R.
Wakefield, W. W.


Higgs, W. F.
Ponsonby, Col. C. E.
Walker-Smith, Sir J.


Hills, Major Rt. Hon. J. W. (Ripon)
Procter, Major H. A.
Wallace, Capt. Rt. Hon. Euan


Hoare, Rt. Hon. Sir S.
Radford, E. A.
Waterhouse, Captain C.


Holdsworth, H.
Raikes, H. V. A. M.
Watt, G. S. H.


Horsbrugh, Florence
Ramsay, Captain A. H. M.
Wayland, Sir W. A


Hume, Sir G. H.
Ramsbotham, H.
Wedderburn, H. J. S.


Hutchinson, G. C.
Rankin, Sir R.
Wickham, Lt.-Col. E. T. R.


Keeling, E. H.
Rayner, Major R. H.
Williams, H. G. (Croydon, S.)


Kerr, J. Graham (Scottish Univs.)
Reid, J. S. C. (Hillhead)
Windsor-dive, Lieut.-Colonel G.


Lamb, Sir J. Q.
Reid, W. Allan (Derby)
Womersley, Sir W. J.


Leckie, J. A.
Rickards, G. W. (Skipton)
Wood, Rt. Hon. Sir Kingsley


Lees-Jones, J.
Ropner, Colonel L.
Wright, Squadron-Leader J. A. C.


Leighton, Major B. E. P.
Ross, Major Sir R. D. (Londonderry)
Young, A. S. L. (Partick)


Liddall, W S.
Ross Taylor, W. (Woodbridge)



Llewellin, Lieut.-Col. J. J.
Rowlands, G.
TELLERS FOR THE NOES.—


Loftus, P. C.
Russell, S. H. M. (Darwen)
Mr. Crimston and Mr. Furness.

NEW CLAUSE.—(Extension of s. 19 of Finance Act, 1920.)

Section nineteen of the Finance Act, 1920 (which, as amended by section twenty-two of the Finance Act, 1924, and section eight of the Finance (No. 2) Act, 1931, makes provision for a deduction in respect of relative or other person taking charge of widowers' or widows' children or acting as housekeeper), shall be extended so as to apply to a person resident with an unmarried person in the capacity of housekeeper, and in the said section the expressions 'widower' and 'widow' shall he deemed to include, respectively, a husband living apart from his wife and a wife living apart from her husband.—[Mr. Alexander.]

Brought up, and read the First time.

9.40 p.m.

Mr. Alexander: I beg to move, "That the Clause he read a Second time."
This Clause deals with a principle which we desire to see adopted, and which has been discussed upon previous Finance Bills. We desire to see extended to unmarried persons, carrying resident with them other persons in the capacity of housekeeper, the same rebate in regard to taxation already allowed under the law to those who, if they are widows or

widowers, keep housekeepers living with them. The reform is obvious, and should speak for itself. I hope that we shall not get the kind of answer which we had from the late Financial Secretary to the Treasury, the present Minister of Agriculture, when he was replying last year, and when he said that it was impossible, in building up the law on taxation, to deal, in matters of this kind, with hard cases. If this Amendment were merely dealing with hard cases, one could expect a hard resistance to the reform for which we are asking, but it deals with a common case of oppressive grievance, which ought to be dealt with, existing throughout large classes of the population. For example, the position of the spinster has never received proper and sympathetic treatment from the Government of the day on this question.
I have here a letter from a woman in my constituency which emphasises, better than any speech of mine could, what the facts are. She was living in a household with her father, who was a widower. It was essential, from the point of view of the father and from that of this woman,


who was engaged in a full-time occupation, that they should have a housekeeper. During the whole of the time that the father was living in that house, he was permitted by the Government a rebate of £50 of Income Tax, because it was necessary to keep a housekeeper for that establishment. The father is now dead. The young woman still has to keep her occupation, and she requires, as much as ever, the housekeeper for her house and the other commitments that she has, but she is denied the right of rebate of tax which was given to her father, in that very house and for the same housekeeper.
I could not put the case in a more direct way than by simply stating what that young woman has written to me, but we might multiply that case in other directions. The same position often arises in the case of a bachelor living with his widowed mother, when a housekeeper is kept chiefly for the sake of the mother. The widowed mother has been getting a rebate of tax, but directly she dies, the son, if he wants to keep the housekeeper, perhaps for the sake of the housekeeper herself who may have become a long-established friend as well, and to keep her in work and protect her from becoming a public charge, is denied the right of rebate of tax. I do not propose to prolong the argument. This seems to me a reform which is urgent and necessary, and eminently just. I hope that we shall not get the kind of formal answer which we got last year.

9.44 p.m.

Mr. Turton: I have on the Paper a proposed new Clause (Application of s. 19 of 10 and 11 Geo. V, c. 18), which I think would be covered by the one which has just been moved.
As from the passing of this Act, section nineteen of the Finance Act, 1920, shall apply to a claimant whose marriage has been dissolved and who has been given the custody of any children of the marriage, so long as such children are under the age of sixteen years, as it applies to a claimant being a widower except that for the purpose of such a claim the words 'or of his deceased wife' shall not apply.
I hope I shall be in order in referring to the case covered by my Clause. The right hon. Gentleman's Clause asks for a very wide concession, and I do not know how much that concession would cost. I think the case has been made

out year by year for some sort of concession to be made in these cases. He has mentioned the housekeeper; I submit that there is also a very strong case where, by order of a court, an unmarried person has to look after children, and has to provide money to somebody to do so, but cannot get any relief under Section 19 as it is drafted to-day. There had been some uncertainty in this matter until the case of Kleman v. Winckworth was decided. When that case was decided, two or three years ago, it caused great hardship among those who had been through the divorce court but to whom the court had awarded the custody of the children.
If my hon. and learned Friend the Attorney-General will look at a proposed new Clause standing in my name on page 1,619 of the Order Paper, he will see that it extends Section 19 to cases where the claimant's marriage has been dissolved and he has been given the custody of any children of the marriage, and it limits the time of the claim to the time while those children are under the age of 16 years. It is now three years since I first moved an Amendment in some such form, and I remember that at that time the present First Lord of the Admiralty replied that my Amendment was not in order, because I did not then state for how long it was to continue, and that it was unfair for a man to claim relief when his children were over 16. That may have been a good drafting point, but it did not really meet the grave hardship in which the present state of the law results. Why should we have a position in which, if a man and a woman are happily married, they can get relief for their children, but in which, through the misfortune of one party and the guilt of another, the innocent party has to have the marriage dissolved but is allowed by the court to look after the children, he or she can get no relief at all? That is a strong case, and I hope the concession will be made.

9.48 p.m.

Mr. Tinker: I want to reinforce what has been said in support of this new Clause, and I think that most Members of this Committee know of cases of this sort. Take the case of two spinsters living together, one of whom goes out to work and the other keeps house for the two of them. The result is that they cannot get any allowance whatever, so


far as Income Tax is concerned. This has been a burning grievance for many years past. We have repeated the arguments in favour of the Clause time after time, and we hope that some day or other some Government may see the wisdom of making this change and giving what is, after all, only a right thing to give.

9.49 p.m.

The Attorney-General: The right hon. Member for the Hillsborough Division (Mr. Alexander) hoped he would not get the same sort of speech in reply that he got from the Financial Secretary to the Treasury last year. He will not; he will not get such a good speech, and he will get one from a slightly different basis, if he accurately epitomised what my right hon. Friend the then Financial Secretary said. When this housekeeper's allowance was introduced, it was confined to cases where there were children to look after, and it was extended, I think in 1924, to widowers or widows whether or not there were children. It may have been that there was a certain lack of logic about that, but that anyhow is where it is at the moment and where, I suggest, it should be kept. My right hon. Friend last year put his opposition to this proposal on the ground that we cannot deal with hard cases, and that is perfectly true, but I will put it on different grounds.
It is a fundamental principle of the Income Tax law that you cannot affect your liability up or down by the way in which you spend your income. Take the case of an unmarried person. I was unmarried for a long time, but I never in fact had a house with a housekeeper. I lived in a flat. One person may choose to live in a flat or lodgings without a housekeeper, and another person may choose to have more of a home in the ordinary sense of the word, which involves a housekeeper. I quite agree that

there may be circumstances which are difficult to get out of, and which compel some people to live in a home rather than in a flat or lodgings, but that principle runs through the whole of the Income Tax law, that as a general rule you are not able to affect your liability up or down by the way in which you choose to spend your money. This housekeeper's allowance was originally confined to cases in which there were children, but it has been extended to widowers and widows. There may be something to be said for the claim that that extension impinged on the general principle which I have tried to enunciate, but we do not think, particularly at any rate this year—and in saying that I am not to be supposed as implying that the point may be ceded in any future year—when the financial condition of the country is what it is, we should change the law in this direction. As a matter of principle, I suggest that it would be better to leave this allowance where it is.

9.52 p.m.

Mr. Alexander: Is the Attorney-General absolutely right in his statement of principle? Is it a fact that the Income Tax law does take no account of how you spend your money? Do you not make an abatement because a man insures himself? If he makes a payment for insurance, he has an allowance made to him, and there are other examples in which the very basis of the abatement is that you depend to a large extent on the kind of expenditure that you choose, in the social as well as in the personal interest, to make. Therefore, we ask for the admission of no new principle in this case; it has already been established.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 127; Noes, 184.

Division No. 253.]
AYES.
[9.53 p.m.


Acland, R. T. D. (Barnstaple)
Brown, C. (Mansfield)
Davies, S. O. (Merthyr)


Adams, D. (Consett)
Brown, Rt. Hon. J. (S. Ayrshire)
Day, H.


Adams, D. M. (Poplar, S.)
Buchanan, G.
Dobbie, W.


Adamson, W. M.
Burke, W. A.
Dunn, E. (Rother Valley)


Alexander, Rt. Hon. A. V. (H'lsbr.)
Cape, T.
Ede, J. C.


Ammon, G. G.
Charleton, H. C.
Edwards, Sir C. (Bedwellty)


Attlee, Rt. Hon. C. R.
Chater, D.
Evans, D. O. (Cardigan)


Banfield, J. W.
Cluse, W. S.
Foot, D. M.


Barr, J.
Cocks, F. S.
Frankel, D.


Batey, J.
Cove, W. G.
Gallacher, W.


Bellenger, F. J.
Cripps, Hon. Sir Stafford
Gardner, B. W.


Benn, Rt. Hon. W. W.
Daggar, G.
Gibson, R. (Greenock)


Broad, F. A.
Davies, R, J. (Westhoughton)
Graham, D. M. (Hamilton)




Green, W. H. (Deptford)
Leonard, W.
Salter, Dr. A. (Bermondsey)


Greenwood, Rt. Hon. A
Leslie, J. R.
Sexton, T. M.


Grenfell, D. R.
Lunn, W.
Silkin, L.


Griffith, F. Kingsley (M'ddl'sbro, W.)
McEntee, V. La T.
Simpson, F. B.


Griffiths, G. A. (Hemsworth)
McGhee, H. G.
Smith, Ben (Rotherhithe)


Gibson, R. (Greenock)
MacLaren, A.
Smith, E. (Stoke)


Groves, T. E.
Maclean, N.
Smith, Rt. Hon. H. B. Lees- (K'ly)


Hall, G. H. (Aberdare)
MacMillan, M. (Western Isles)
Smith, T. (Normanton)


Hall, J. H. (Whitechapel)
Mainwaring, W. H.
Sorensen, R. W.


Harris, Sir P. A.
Marshall, F.
Stephen, C.


Henderson, J. (Ardwick)
Mathers, G.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Henderson, T. (Tradeston)
Messer, F.
Strauss, G. R. (Lambeth, N.)


Hills, A. (Pontefract)
Milner, Major J.
Taylor, R. J. (Morpeth)


Holdsworth, H.
Montague, F.
Thurtle, E.


Hollins, A.
Morrison, Rt. Hon. H. (Hackney, S.)
Tinker, J. J.


Hopkin, D.
Morrison, R. C. (Tottenham, N.)
Viant, S. P.


Jagger, J.
Naylor, T. E.
Walkden, A. G.


Jenkins, A. (Pontypool)
Noel-Baker, P. J.
Walker, J.


Jenkins, Sir W. (Neath)
Oliver, G. H.
Watkins, F. C.


Johnston, Rt. Hon. T.
Paling, W.
Watson, W. McL.


Jones, A. C. (Shipley)
Parker, J.
Welsh, J. C.


Jones, Morgan (Caerphilly)
Parkinson, J. A.
Westwood, J.


Kelly, W. T.
Pethick-Lawrence, Rt. Hon. F. W.
Wilkinson, Ellen


Kennedy, Rt. Hon. T.
Price, M. P.
Williams, T. (Don Valley)


Kirby, B. V.
Pritt, D. N.
Windsor, W. (Hull, C.)


Kirkwood, D.
Quibell, D. J. K.
Woods, G. S. (Finsbury)


Lansbury, Rt. Hon G.
Ridley, G.
Young, Sir R. (Newton)


Lathan, G.
Riley, B.



Lawson, J. J.
Ritson, J.
TELLERS FOR THE AYES.—


Leach, W.
Robinson, W. A. (St. Helens)
Mr. Whiteley and Mr. John


Lee, F.
Rowson, G.





NOES.


Acland-Troyte, Lt.-Col. G. J.
Duncan, J. A. L.
McCorquodale, M. S.


Adams, S. V. T. (Leeds, W.)
Eastwood, J. F.
MacDonald, Rt. Hon. M. (Ross)


Agnew, Lieut.-Comdr. P. G.
Edmondson, Major Sir J.
Macdonald, Capt. P. (Isle of Wight)


Albery, Sir Irving
Ellis, Sir G.
Macmillan, H. (Stockton-on-Tees)


Anstruther-Gray, W. J.
Elliston, Capt. G. S.
Macnamara, Capt. J. R. J.


Apsley, Lord
Emrys-Evans, P. V.
Magnay, T.


Aske, Sir R. W.
Entwistle, Sir C. F.
Maitland, A.


Baillie, Sir A. W. M.
Erskine-Hill, A. G.
Makins, Brig.-Gen. E.


Baldwin-Webb, Col. J.
Everard, W. L.
Manningham-Buller, Sir M.


Balfour, G. (Hampstead)
Fildes, Sir H.
Margesson, Capt. Rt. Hon. H. D. R.


Balfour, Capt. H. H. (Isle of Thanet)
Fremantle, Sir F. E.
Mayhew, Lt.-Col. J.


Beauchamp, Sir B. C.
Ganzoni, Sir J.
Mellor, Sir J. S. P. (Tamworth)


Beaumont, Hon. R. E. B. (Portsm'h)
Gledhill, G.
Mills, Sir F. (Leyton, E.)


Boyce, H. Leslie
Gluckstein, L. H.
Mills, Major J. D. (New Forest)


Brass, Sir W.
Goldie, N. B.
Morrison, G. A. (Scottish Univ's.)


Briscoe, Capt. R. G.
Gower, Sir R. V.
Muirhead, Lt.-Col. A. J.


Brocklebank, Sir Edmund
Grant-Ferris, R.
Munro, P.


Brown, Rt. Hon. E. (Leith)
Grettor, Col. Rt. Hon. J.
Neven-Spence, Major B. H. H.


Brown, Brig.-Gen. H. C. (Newbury)
Gritten, W. G. Howard
Ormsby-Gore, Rt. Hon. W. G. A.


Bull, B. B.
Guest, Lieut.-Colonel H. (Drake)
Orr-Ewing, I. L.


Bullock, Capt. M,
Guest, Maj. Hon. O. (C'mb'rw'll, N.W.)
Patrick, C. M.


Butcher, H. W.
Guinness, T. L. E. B.
Peake, O.


Carver, Major W. H.
Gunston, Capt. D. W.
Peat, C. U.


Cary, R. A.
Guy, J. C. M.
Petherick, M.


Castlereagh, Viscount
Hannah, I. C.
Pilkington, R.


Cayzer, Sir H. R. (Portsmouth, S.)
Hannon, Sir P. J. H.
Ponsonby, Col. C. E.


Chamberlain, Rt. Hn. N. (Edgb't'n)
Haslam, Sir J. (Bolton)
Procter, Major H. A.


Clarke, Lt.-Col. R. S. (E. Grinstead)
Heilgers, Captain F. F. A.
Radford, E. A.


Cobb, Captain E. C. (Preston)
Heneage, Lieut.-Colonel A. P.
Raikes, H. V. A. M.


Colville, Lt.-Col. Rt. Hon. D. J.
Hepburn, P. G. T. Buchan-
Ramsay, Captain A. H. M.


Conant, Captain R. J. E.
Hepworth, J.
Ramsbotham, H.


Cock, Sir T. R. A. M. (Norfolk, N.)
Herbert, Major J. A. (Monmouth)
Rankin, Sir R.


Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Higgs, W. F.
Rayner, Major R. H.


Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Hills, Major Rt. Hon. J. W. (Ripon)
Reid, J. S. C. (Hillhead)


Cox, H. B. T.
Hoare, Rt. Hon. Sir S.
Reid, W. Allan (Derby)


Craven-Ellis, W.
Horsbrugh, Florence
Rickards, G. W. (Skipton)


Croft, Brig.-Gen. Sir H. Page
Hume, Sir G. H.
Ropner, Colonel L.


Crooke, J. S.
Hutchinson, G. C.
Ross, Major Sir R. D. (Londonderry)


Crookshank, Capt. H. F. C.
Keeling, E. H.
Ross Taylor, W. (Woodbridge)


Cross, R. H.
Kerr, J. Graham (Scottish Univs.)
Rowlands, G.


Crossley, A. C.
Lamb, Sir J. Q.
Russell, S. H. M. (Darwen)


Crowder, J. F. E.
Leckie, J. A,
Salmon, Sir I.


Cruddas, Col. B.
Lees-Jones, J.
Samuel, M. R. A.


Dawson, Sir P.
Leighton, Major B. E. P.
Sanderson, Sir F. B.


Denville, Alfred
Liddall, W. S.
Savery, Sir Servington


Dixon, Capt. Rt. Hon. H.
Llewellin, Lieut.-Col. J. J.
Scott, Lord William


Donner, P. W.
Loftus, P. C.
Selley, H. R.


Dower, Major A. V. G.
Lovat-Fraser, J. A.
Shakespeare, G. H.


Drewe, C.
Lyons, A. M.
Shaw, Major P. S. (Wavertree)


Duckworth, W. R. (Moss Side)
Mabane, W. (Huddersfield)
Shaw, Captain W. T. (Forfar)


Dugdale, Captain T. L.
MacAndrew, Colonel Sir C. G.
Simon, Rt. Hon. Sir J. A.







Smith, Bracewell (Dulwich)
Thomas, J. P. L.
Wayland, Sir W. A.


Smith, Sir R. W. (Aberdeen)
Thomson, Sir J. D. W.
Wedderburn, H. J. S.


Somervell, Sir D. B. (Crewe)
Touche, G. C.
Wickham, Lt.-Col. E. T. R.


Somerville, A. A. (Windsor)
Tryon, Major Rt. Hon. G. C.
Williams, H. G. (Croydon, S.)


Southby, Commander Sir A. R. J.
Tufnell, Lieut.-Commander R. L.
Windsor-Clive, Lieut.-Colonel G.


Spens, W. P.
Turton, R. H.
Womersley, Sir W. J.


Strauss, H. G. (Norwich)
Wakefield, W. W.
Wood, Rt. Hon. Sir Kingsley


Strickland, Captain W. F.
Walker-Smith, Sir J.
Wright, Squadron-Leader J. A. C.


Stuart, Hon. J. (Moray and Nairn)
Wallace, Capt. Rt. Hon. Euan
Young, A. S. L. (Partick)


Sutcliffe, H.
Waterhouse, Captain C.



Tasker, Sir R. I.
Watt, G. S. H.
TELLERS FOR THE NOES.—




Mr. Grimston and Mr. Furness.

NEW CLAUSE.—(Repeal of 22 and 23 Geo. 5, c. 30.)

The Irish Free State (Special Duties) Act, 1932, is hereby repealed, and any customs duties imposed under that Act shall cease to be charged.—[Mr. Morgan Jones.]

Brought up, and read the First time.

10.0 p.m.

Mr. Morgan Jones: I beg to move, "That the Clause be read a Second time."
It will be known to many Members of the Committee that this is a subject of almost perpetual interest, and, if we do not dwell at any length on the matter, I hope the Government will not regard it on that account as being unimportant in our minds. We still regard this matter as one of fundamental importance. The duties in question were, of course, imposed by the Government in view of the fact that certain annuities, which were deemed to be due from the Irish Free State, had not been paid. The Government held that the non-payment of these annuities was a breach of an agreement which had been arrived at at some previous date. It is fair to say that the people of the Irish Free State allege, anyhow, that in their judgment the annuities were no longer due. I shall not enter into that very vexed argument, because this is not, perhaps, the appropriate place to do so. But, whatever the merits of the dispute might have been as between one side and the other, the House of Commons in 1932 determined that certain customs duties should be imposed under the Irish Free State (Special Duties) Act, 1932.
The question I should like to ask is whether the Government, with this long experience of these duties, now feel that it is worth while from every point of view to maintain them, or, indeed, any such proposal. I can quite imagine that the representatives of the Treasury to-night will say that the Irish Free State owed us £x, that they did not pay that sum, that we were obliged to impose the special

duties, and that, by means of these duties, we have been able to recoup a certain amount of money. I suppose that that is how they would argue that their legislation has been attended with some measure of success. But how is success to be measured in this matter? That is the fundamental issue which is raised. In the first place, is it quite accepted ground that it is the Irish people themselves who have paid these taxes? I should venture to assert, even if I could not show that the whole of these duties has been paid by the people on this side of the Irish Sea, that certainly it would be very easy to sustain the proposition that a very substantial proportion of these duties has been paid by our own people. So whatever sum the Government have been able to extract by reason of these duties they have extracted with some difficulty from the pockets not of the Irish but of the English, Welsh and Scottish people. Is that what is called success?
The operation of the duties has had certain inevitable consequences. They have had a substantial effect upon the trade of our Western ports. Fishguard and Holyhead were engaged in a substantial trade with Ireland. I do not suppose that the depression is wholly due to the duties, but a substantial measure of it is due directly to their operation. You have, so to speak, been "cutting off your nose to spite your face." Is that what is regarded as success? These duties in their origin were retaliatory in intention as well as in some degree in their effect. Would the Dominions Secretary from his point of view regard them as being a success? I am sure he must desire to see an end to this impasse between ourselves and the Irish Free State at as early a date as possible. While these duties are retained, the chance of throwing a bridge so to speak, across the Irish Sea is reduced almost to a minimum. They have embittered and antagonised Irish opinion. Suppose I grant, for the sake of argument, that the Government may have got their money. I doubt it,


but suppose they have. Is it worth while getting the money they do get if, in the process of getting it, they dig deeper the gulf between us and the Irish people? The outlook in Europe is such as to induce the right hon. Gentleman to seek every possible opportunity to restore cordiality between ourselves and the Irish Free State.
From the financial point of view the duties are scarcely justified, for in the ultimate result it is the people of this country who pay the duties. From the Dominions point of view it is certainly ill-advised, and from the broader international point of view it is deplorable that this dispute should be maintained so long without some effort being made by the Government to restore cordial relations. A very substantial contribution to that restoration of good relations would, in my judgment, be the acceptance of the Motion which I now make.

10.11 p.m.

Lieut.-Colonel Colville: The hon. Gentleman has urged his case with great sincerity and I am very anxious to say nothing which would in any way widen the difference on this financial question between the Irish Free State and this country, but I am bound to point out one or two reasons why we cannot accept the Clause. In 1933–34 the yield of these duties was £4,100,000, in the following year it was £4,200,000, in the next year £4,900,000 and in the year after, £4,200,000. The estimated yield in the present year is about £4,100,000. As against that, the estimated amount required this year is £4,704,000. I do not propose to follow the hon. Gentleman in the argument as to who pays an import duty. We hold the view that the duty is very substantially paid by the exporter in the other country. The hon. Gentleman holds the directly contrary view and we might face each other all night and half to-morrow and we should never agree. Nevertheless, there is a considerable sum of money which we have to find for the purpose that I have indicated. In February, 1936, substantial reductions, estimated to cost £650,000 a year, were made as part of an arrangement involving additional imports of cattle from the Irish Free State and coal from the United Kingdom. In February last the 20 per cent. ad valorem duty on live

horses was removed as part of an arrangement for renewing, with modifications, the arrangement that I have mentioned, and that was estimated to cost £80,000 a year. Since those agreements were made, there has been a very considerable measure of recovery in the trade between the two countries. On the general question of our relations with the Irish Free State arising out of this financial matter, in again renewing the coal-cattle arrangement and removing the duty on live horses the Government have shown their readiness to accept measures likely to prove of benefit to the two countries and hope that such measures may lead to the establishment of improved relations generally.

Mr. Wedgwood Benn: On a point of Order. Is it in order for one Department to give an answer relating to the relations between this country and the Irish Free State when the Minister specially charged with those relations is sitting there, apparently not going to speak?

The Deputy-Chairman: I have always understood that a Government were one and indivisible.

Lieut.-Colonel Colville: This Government is entirely one, and there is no doubt about that. If the right hon. Gentleman who himself has been a member of Governments of various complexions in the past will cast his mind back, he will recall this elementary truth of which he has just been reminded from the Chair. As they have indicated on many occasions, His Majesty's Government in this country would be very ready, if they thought a satisfactory basis of discussion could be secured, to enter into negotiations with the Irish Free State Government with a view to the settlement of all the questions outstanding; but until that time we do not see any reason for ceasing to collect in taxation the sums required to meet the various obligations which we maintain should, under existing conditions, be met by the Irish Free State. That is the answer to the claim of the hon. Gentleman, and I believe that it is one that will appeal to the Committee, and I am sorry that I cannot accept the Clause.

10.17 p.m.

Mr. J. Griffiths: The Financial Secretary has told us that the yield from this


Irish duty amounts in round figures to £4,000,000, and may I ask whether he can compute setting off against that, first of all, the loss which has not yet been recovered or anything like recovered in the amount of coal that used to be sent from Wales to Ireland and, secondly, the amount of loss sustained all along the coast on this side of the Channel in the cattle trade, and thirdly, the amount of unemployment benefit that has been provided, for example, for the workmen in Holyhead where, according to the latest figures, the unemployment is about 48 per cent. and is exclusively due to this policy? There is no other reason for it. It is a condition which has grown up out of this Irish problem. He should set against the duty the amount of money provided for unemployment which would be saved to the Unemployment Fund. Most of it now would be saved to the Treasury because it is not unemployment benefit but unemployment allowance paid by the Unemployment Assistance Board. There is, lower down the coast, the Port of Fishguard, which grew up on this trade. An enormous amount of capital has been spent in developing that port for this Irish trade. In spite of the agreements to which the right hon, and gallant Gentleman has referred, the improvements are very slight, and I would ask him, deducting these consequential losses, how much is the yield of this tax on these imports from the Irish Free State?

10.19 p.m.

Major Hills: I would have thought that of all the Members of this House the hon. Member for Caerphilly (Mr. Morgan Jones) would be the one most anxious to support the sanctity of what was an international bargain. I believe that there is no more sincere advocate of peace than the hon. Gentleman, but peace means the observance of law, and it cannot obtain unless the law is respected and observed. It is no good to talk about these duties as if they were independent of the bargain, in consequence of the breach of which these duties are imposed. The British Government were faced with the breaking of a solemn bargain that was made between the Irish Free State and ourselves, and we either had to sit down under it or take means of enforcing our undoubted right to the money.

Mr. Morgan Jones: Is that strictly so? Did not the Irish Free State offer to submit it to arbitration?

Major Hills: They wanted foreign arbitration. Since the matter was an inter-Imperial matter, it must be an Empire tribunal, and nobody who respects himself can say anything else. It was not a matter for a foreign tribunal, and the hon. Member knows that perfectly well. The excuses made by the hon. Member and his friends were various. This treaty was made in February, 1923. It was said, first of all, that Mr. Cosgrave and the Irish representatives were overwhelmed. In addition to Mr. Cosgrave, there was Mr. Hogan, his Minister of Agriculture, Mr. Kennedy, his Attorney-General, and Mr. Justice Wylie, a very distinguished Irish judge, besides two civil servants. On the other side who was there? Myself. My right hon. Friend the present Colonial Secretary was in the room, but all the bargaining was done by me. I do not pretend that I had not the assistance of the ablest body in the whole world, the Treasury. The representatives, therefore, consisted of three Irish Ministers and one judge, and one of those Ministers was Prime Minister of the Free State. So much for that point.
The second point was that it was a bad bargain on Mr. Cosgrave's part. I would ask any hon. Member of this House whether he has ever known an Irishman who was a bad bargainer. They are the keenest bargainers I have ever met. The bargaining for this Treaty took, I think, three days. There were a very large number of points to be discussed, and the discussion was keen. No one who has met Mr. Cosgrave can doubt that he is a man of outstanding ability and strength of will. The third point was that it was a hole-and-corner affair. The discussion took place between the authorised representatives of the two Governments. I do not know whether that was a hole-and-corner affair. It was also said that the agreement was kept secret. Was it kept secret? It was mentioned in the Dail, and the annuities were paid under it. These distinguished Senators and Members of Parliament in the Irish Free State, who protest that they knew nothing about it, could not have kept their eyes open, for if they had looked


at the national accounts of the Free State they would have seen the payments of these annuities year after year.
Lastly, Mr. Kennedy, who was Mr. Cosgrave's Attorney-General, himself supervised the drafting of the agreement. If you are to have an international agreement that is good and ought to be enforced, what better agreement could you have than this? It was drawn up after due discussion. There were many points of dispute, concessions were made on both sides, and at the end of the debate complete agreement was arrived at. It en the scene changed in Ireland. A different party came into power and they repudiated the agreement. What would hon. Members have had the British Government do? What would hon. Members opposite have done? Would they have taken it lying down? Surely not. They are much better men than they think themselves. On whom does the loss fall? These annuities are guaranteed by the British Government, and if there is any loss the British taxpayer has to find it. The hon. Member for Caerphilly did not tell the Committee that if this money is not collected by these special duties his constituents will have to find the money.

Mr. Morgan Jones: They would do so willingly.

Major Hills: I doubt it. For all these reasons, because the bargain arrived at was a reasonable bargain, because a bargain must be kept, and also because the loss will fall on the taxpayer, I hope the Committee will oppose the Amendment. But let me put it on higher ground than that. May I remind the hon. Member that the only hope for the world is that the rule of law should prevail? That means that a bargain should be kept. Here, hon. Members opposite are condoning the breaking of a bargain and attacking the Government for taking the best means for enforcing it.

10.27 p.m.

Mr. Benn: While bearing in mind your dictum, Captain Bourne, that the Government is one, I should like to draw attention to the fact that we have the Minister present who could corroborate the statement of the right hon. and gallant Member for Ripon (Major Hills), but he maintains a silence; he is not

allowed to say a word. He is not allowed to tell us what we want to know, and what was the real gravamen of my hon. Friend's speech, whether anything is being done to assuage this quarrel between ourselves and the Irish Free State. The Secretary of State for the Dominions is the only person who can tell us that. The Financial Secretary is concerned with pounds, shillings and pence, the right hon. Gentleman is concerned with the relations between this country and the Irish Free State, a far more important matter. But he is not going to say a word and tell us whether the hopes which are held out by another Department as to better relations can be confirmed or not. As regards the speech of the right hon. and gallant Member for Ripon no one is defending the breach of a bargain.

Major Hills: Oh, yes. It was defended for a variety of reasons while the right hon. Gentleman was not in Parliament.

Mr. Benn: The right hon. and gallant Member is referring to some other Debate. My hon. Friend the Member for Caerphilly (Mr. Morgan Jones) was attacking the wisdom of this method of retaliation, that was all. We contend that the Government have made no case to show that this has been effective, because the Secretary of State for the Dominions will not tell us whether it is bringing any better relations between this country and Ireland or not. He is just silent; he will not even indicate what his feelings are. As regards arbitration, I do not think the right hon. and gallant Member for Ripon did full justice to the Irish position. He knows that for various political reasons they were not willing to submit it to a Commonwealth tribunal, but they did offer to submit it to a tribunal.

Major Hills: I said so.

Mr. Benn: Exactly, but the right hon. and gallant Member hardly gave the Committee the impression that the Irish Free State Government was willing to have the matter arbitrated by an impartial tribunal.

Major Hills: We offered arbitration by an Imperial tribunal, and the Irish Free State refused.

Mr. Benn: Exactly, but at the same time they intimated that they were willing to accept arbitration by an international tribunal.

Captain Ramsay: Surely the Irish Free State offer to accept an international tribunal was one which they knew could not be accepted by the Government.

Mr. Benn: The main part of the charge was that the Irish were not prepared to submit the question to arbitration, but it is clearly true that they were prepared to do that, although they were not prepared to submit it to the kind of tribunal which this Government wanted. The third point relating to the unity of the Government to which I would like to refer is the question, Who pays? The greatest master on that subject is the Chancellor of the Exchequer. Over a period of more than 30 years I heard him explain time and time again who pays these duties. He was either president or treasurer, or some high officer, in the Free Trade Union, and he explained throughout the country that the idea that the foreigner paid the tax was pure nonsense, and that the tax fell upon the consumer. I think

it is fair to ask, seeing that we cannot get an answer from the. Secretary of State for Dominion Affairs, that the Chancellor of the Exchequer should just say, in a word or by a gesture, whether he is confident that in this case the tax is paid not by the consumer but by the foreigner.

10.31 p.m.

Colonel Gretton: The right hon. Gentleman the Member for Gorton (Mr. Benn) and other hon. Members are very anxious as to who pays the duty on Irish cattle. If I am rightly informed, the Irish Government pay a bounty on Irish cattle which are exported to this country so they can be sold cheaply in the British market, and ultimately there is a charge in the Irish Free State Budget with regard to these duties. That is the answer to the question as to who pays the tax.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 130; Noes, 194.

Division No. 254.]
AYES.
[10.32 p.m.


Acland, R. T. D. (Barnstaple)
Griffiths, J. (Llanelly)
Morrison, R. C. (Tottenham, N.)


Adams, D. (Consett)
Groves, T. E.
Naylor, T. E.


Adams, D. M. (Poplar, S.)
Hall, G. H. (Aberdare)
Noel-Baker, P. J.


Adamson, W. M.
Hall, J. H. (Whitechapel)
Oliver, G. H.


Alexander, Rt. Hon. A. V. (H'lsbr.)
Harris, Sir P. A.
Paling, W.


Ammon, C. G.
Henderson, A. (Kingswinford)
Parker, J.


Anderson, F. (Whitehaven)
Henderson, J. (Ardwick)
Parkinson, J. A.


Attlee, Rt. Hon. C. R.
Henderson, T. (Tradeston)
Pethick-Lawrence, Rt. Hon. F. W.


Banfield, J. W.
Hills, A. (Pontefract)
Price, M. P.


Barr, J.
Holdsworth, H.
Quibell, D. J. K.


Batey, J.
Hollins, A.
Ridley, G.


Bellenger, F. J.
Hopkin, D.
Riley, B.


Benn, Rt. Hon. W. W.
Jagger, J.
Ritson, J


Broad, F. A.
Jenkins, A. (Pontypool)
Robinson, W. A. (St. Helens)


Brown, C. (Mansfield)
Jenkins, Sir W. (Neath)
Rowson, G.


Brown, Rt. Hon. J. (S. Ayrshire)
John, W.
Salter, Dr. A. (Bermondsey)


Buchanan, G.
Johnston, Rt. Hon. T.
Sexton, T. M.


Burke, W. A.
Jones, A. C. (Shipley)
Silkin, L.


Cape, T.
Jones, Morgan (Caerphilly)
Simpson, F. B.


Chater, D.
Kelly, W. T.
Smith, Ben (Rotherhithe)


Cluse, W. S.
Kennedy, Rt. Hon. T.
Smith, E. (Stoke)


Cocks, F. S.
Kirby, B. V.
Smith, Rt. Hon. H. B. Lees- (K'ly)


Cove, W. G.
Kirkwood, D.
Smith, T. (Normanton)


Cripps, Hon. Sir Stafford
Lansbury, Rt. Hon. G.
Sorensen, R. W.


Daggar, G.
Lathan, G.
Stephen, C.


Davidson, J. J. (Maryhill)
Lawson, J. J.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Davies, R. J. (Westhoughton)
Leach, W.
Strauss, G. R. (Lambeth, N.)


Davies, S. O. (Merthyr)
Lee, F.
Taylor, R. J. (Morpeth)


Day, H.
Leonard, W.
Thurtle, E.


Dobbie, W.
Leslie, J. R.
Tinker, J. J.


Dunn, E. (Rother Valley)
Lunn, W.
Viant, S. P.


Ede, J. C.
McEntee, V. La T.
Walkden, A. G.


Edwards, Sir C. (Bedwellty)
McGhee, H. G.
Walker, J.


Evans, D. O. (Cardigan)
MacLaren, A.
Watkins, F. C.


Frankel, D.
Maclean, N.
Watson, W. McL.


Gallacher, W.
MacMillan, M. (Western Isles)
Welsh, J. C.


Gardner, B. W.
Mainwaring, W. H.
Westwood, J.


Garro Jones, G. M.
Marshall, F.
Wilkinson, Ellen


Graham, D. M. (Hamilton)
Mathers, G.
Williams, T. (Don Valley)


Green, W. H. (Deptford)
Maxtor, J.
Windsor, W. (Hull, C.)


Greenwood, Rt. Hon. A.
Messer, F.
Woods, G. S. (Finsbury)


Grenfell, D. R.
Milner, Major J.
Young, Sir R. (Newton)


Griffith, F. Kingsley (M'ddl'sbro, W.)
Montague, F.



Griffiths, G. A. (Hemsworth)
Morrison, Rt. Hon. H. (Hackney, S.)
TELLERS FOR THE AYES.—




Mr. Whiteley and Mr. Charleton.




NOES.


Acland-Troyte, Lt.-Col. G. J.
Fremantle, Sir F. E.
Petherick, M.


Adams, S. V. T. (Leeds, W.)
Furness, S. N.
Pilkington, R.


Agnew, Lieut.-Comdr. P. G.
Ganzoni, Sir J.
Ponsonby, Col. C. E.


Albery, Sir Irving
Gledhill, G.
Procter, Major H. A.


Anstruther-Gray, W. J.
Gluckstein, L. H.
Radford, E. A.


Apsley, Lord
Goldie, N. B.
Raikes, H. V. A. M.


Aske, Sir R. W.
Gower, Sir R. V.
Ramsay, Captain A. H. M.


Astor, Hon. W. W. (Fulham, E.)
Grant-Ferris, R.
Ramsbotham, H.


Baillie, Sir A. W. M.
Gretton, Col. Rt. Hon. J.
Rankin, Sir R.


Baldwin-Webb, Col. J.
Grimston, R. V.
Rayner, Major R. H.


Balfour, G. (Hampstead)
Gritten, W. G. Howard
Reed, A. C. (Exeter)


Balfour, Capt. H. H. (Isle of Thanet)
Guest, Lieut.-Colonel H. (Drake)
Reid, J. S. C. (Hillhead)


Beauchamp, Sir B. C.
Guest, Maj. Hon. O. (C'mb'rw'll, N.W.)
Reid, W. Allan (Derby)


Beaumont, Hon. R. E. B. (Portsm'h)
Guinness, T. L. E. B.
Remer, J. R.


Boyce, H. Leslie
Gunston, Capt. D. W.
Rickards, G. W. (Skipton)


Brass, Sir W.
Guy, J. C. M.
Ropner, Colonel L.


Briscoe, Capt. R. G.
Hannah, I. C.
Ross, Major Sir R. D. (Londonderry)


Brocklebank, Sir Edmund
Hannon, Sir P. J. H.
Ross Taylor, W. (Woodbridge)


Brown, Rt. Hon. E, (Leith)
Hartington, Marquess of
Rowlands, G.


Brown, Brig.-Gen. H. C. (Newbury)
Haslam, Sir J. (Bolton)
Russell, S. H. M. (Darwen)


Bull, B. B.
Heilgers, Captain F. F. A.
Salmon, Sir I.


Bullock, Capt. M.
Heneage, Lieut.-Colonel A. P.
Samuel, M. R. A.


Butcher, H. W.
Hepburn, P. G. T. Buchan-
Sanderson, Sir F. B.


Carver, Major W. H.
Hepworth, J.
Savery, Sir Servington


Cary, R. A.
Herbert, Major J. A. (Monmouth)
Scott, Lord William


Castlereagh, Viscount
Higgs, W. F.
Selley, H. R.


Cayzer, Sir H. R. (Portsmouth, S.)
Hills, Major Rt. Hon. J. W. (Ripon)
Shakespeare, G. H.


Chamberlain, Rt. Hn. N. (Edgb't'n)
Hoare, Rt. Hon. Sir S.
Shaw, Major P. S. (Wavertree)


Clarke, Lt.-Col. R. S. (E. Grinstead)
Horsbrugh, Florence
Shaw, Captain W. T. (Forfar)


Cobb, Captain E. C. (Preston)
Hudson, Capt. A. U. M. (Hack., N.)
Simon, Rt. Hon. Sir J. A.


Colman, N. C. D.
Hume, Sir G. H.
Smith, Bracewell (Dulwich)


Colville, Lt.-Col. Rt. Hon. D. J.
Hutchinson, G. C.
Smith, Sir R. W. (Aberdeen)


Conant, Captain R. J E.
Keeling, E. H.
Somervell, Sir D. B. (Crewe)


Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Kerr, J. Graham (Scottish Univs.)
Somerville. A. A. (Windsor)


Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Lamb, Sir J. Q.
Southby, Commander Sir A. R. J.


Cox, H. B. T.
Law, R. K. (Hull, S.W.)
Spens, W. P.


Craven-Ellis, W.
Leckie, J. A.
Stanley, Rt. Hon. Oliver (W'm'l'd)


Croft, Brig.-Gen. Sir H. Page
Lees-Jones, J.
Strauss, H. G. (Norwich)


Crooke, J. S.
Leighton, Major B. E. P.
Strickland, Captain W. F.


Crookshank, Capt. H. F. C.
Liddall, W. S.
Stuart, Hon. J. (Moray and Nairn)


Cross, R. H.
Llewellin, Lieut.-Col. J. J.
Sueter, Rear-Admiral Sir M. F.


Crossley, A. C.
Loftus, P. C.
Sutcliffe, H.


Crowder, J. F. E.
Lovat-Fraser, J. A.
Tasker, Sir R. I.


Cruddas, Col. B.
Lyons, A. M.
Thomson, Sir J. D. W.


Dawson, Sir P.
Mabane, W. (Huddersfield)
Touche, G. C.


Denville, Alfred
MacAndrew, Colonel Sir C. G.
Tryon, Major Rt. Hon. G. C.


Dixon, Capt. Rt. Hon. H.
McCorquodale, M. S.
Tufnell, Lieut.-Commander R. L.


Donner, P. W.
MacDonald, Rt. Hon. M. (Ross)
Turton, R. H.


Dower, Major A. V. G.
Macdonald, Capt. P. (Isle of Wight)
Wakefield, W. W.


Drewe, C.
Macmillan, H. (Stockton-on-Tees)
Walker-Smith, Sir J.


Duckworth, W. R. (Moss Side)
Macnamara, Capt. J. R. J.
Wallace, Capt. Rt. Hon. Euan


Dugdale, Captain T. L.
Magnay, T.
Ward, Irene M. B. (Wallsend)


Duggan, H. J.
Maitland, A.
Watt, G. S. H.


Duncan, J. A. L.
Makins, Brig.-Gen. E.
Wayland, Sir W. A


Eastwood, J. F.
Manningham-Buller, Sir M.
Wedderburn, H. J. S.


Eckersley, P. T.
Margesson, Capt. Rt. Hon. H. D. R.
Wickham, Lt.-Col. E. T. R.


Edmondson, Major Sir J.
Mayhew, Lt.-Col. J.
Williams, H. G. (Croydon, S.)


Elliot, Rt. Hon. W. E.
Mellor, Sir J. S. P. (Tamworth)
Windsor-Clive, Lieut.-Colonel G.


Ellis, Sir G.
Mills, Major J. D. (New Forest)
Womersley, Sir W. J.


Elliston, Capt. G. S.
Morrison, G. A. (Scottish Univ's.)
Wood, Rt. Hon. Sir Kingsley


Elmley, Viscount
Muirhead, Lt.-Col. A. J.
Wright, Squadron-Leader J. A. C.


Emrys-Evans, P. V.
Neven-Spence, Major B. H. H.
Young, A. S. L. (Partick)


Entwistle, Sir C. F.
Orr-Ewing, I. L.



Erskine-Hill, A. G.
Patrick, C. M.
TELLERS FOR THE NOES.—


Everard, W. L.
Peake, O.
Captain Waterhouse and Mr.


Fildes, Sir H.
Peat, C. U.
Munro.

The Deputy-Chairman: Mr. Liddall.

Mr. Alexander: On a point of Order. Do I understand that you are not calling the next two proposed new Clauses in my name and in the name of the hon. Member for East Rhondda (Mr. Mainwaring) (Import Duties Act, 1932, not to apply to foodstuffs) and (Deduction in respect of dependent relatives)?

The Deputy-Chairman: That is so.

10.41 p.m.

Mr. Alexander: Then I move, "That the Chairman do report Progress, and ask leave to sit again."

The Deputy-Chairman: The right hon. Gentleman cannot move to report Progress because I have not selected certain proposed new Clauses.

Mr. Alexander: We are in Committee of Ways and Means. We represent the


taxpayers and it is in Committee of Ways and Means that we seek the redress of their grievances. There is nothing which is out of order in the proposed new Clause which I have put on the Paper dealing with taxes amounting to £13,000,000 on the food of the people. The question has been discussed in a previous year in Committee of Ways and Means, and in the face of rising food prices and new taxes which are being put on by the Government it is nothing but an insult to the Opposition and to the consumers of this country that we should be denied the right to debate a matter on which we ought to be able to secure redress.

The Deputy-Chairman: It is precisely because of the discussion on the previous occasion that I did not select the right hon. Gentleman's proposed new Clause. I agree that the point which the right hon. Gentleman wishes to raise is one of great importance, but unfortunately his Clause does not raise it. If it did so I should have selected it.

Mr. Alexander: With great respect, my proposed new Clause is precisely in the form in which it was moved in the previous discussion on the Finance Bill. It raises the whole issue which was raised in that discussion. We cannot get away from the impression that this important matter is simply being kangarooed, and we think that that is a disgraceful way for us to be treated from the point of view of our getting rightful redress of the grievances of the taxpayers.

The Deputy-Chairman: It is because of the discussion on the previous occasion that this proposed new Clause has not been selected. The great bulk of these duties do not come under this Act but under the Ottawa Duties Act and, I believe, under some special Acts. If the right hon. Gentleman had drafted an Amendment to cover the points he wishes to raise, I should have selected it, but it is because it covers only a tiny part of them that I have not selected it.

Mr. H. G. Williams: Is it not the case that we are not in the Committee of Ways and Means but in the Committee of the Whole House?

Lieut.-Colonel Heneage: In view of the latitude given to the right hon. Gentleman opposite, are we to understand that

if any of our Amendments are not selected we shall have the right to challenge the Chair in the same way?

The Deputy-Chairman: I would add that I remember the last Debate, and nearly everyone of the speakers had to be stopped because it was pointed out that the particular duties referred to were not covered by the new Clause which had been proposed. If the right hon. Gentleman drafts a new Clause which covers the points he wishes to raise, I will certainly consider it.

Mr. Alexander: I shall do that, but I submit that there are a large number of food duties which I have dealt with myself before the Import Duties Advisory Committee which are covered by my proposed new Clause.

Miss Wilkinson: Is it not a fact that the position with regard to food taxes has become much more serious than it was when the previous discussion took place, and that therefore discussion on this proposed new Clause would at this time be very much to the point because of the great feeling among the housewives of the country that the rise in the cost of their foodstuff is becoming positively intolerable?

The Deputy-Chairman: That may be so, but I must adhere to my decision.

10.45 p.m.

Mr. Garro Jones: On a point of Order. Without in any way contesting the soundness of your judgment in the selection of Amendments, Captain Bourne, I desire to ask you whether you could give your guidance to the Committee as to what steps it would be proper to take if Members of the Committee desired to know on what principles Amendments were accepted or rejected? I should also like to ask about the notice which is given to the House collectively in advance as to which Amendments are in fact going to be called and which are not. Further to that point, I should like to draw attention to the fact that some days ago I was informed through an unofficial channel that an Amendment which stood in my name on the Order Paper was not to be called. I heard it purely by chance. A number of other hon. Members have made extensive preparations for their speeches and have found that their Amendments have not been called.


In these circumstances I desire to submit that it would be for the convenience of the Committee and hon. Members as a whole if some method were established which would inform hon. Members in advance of what Amendments would be called. What I wish to know is what method could be adopted.

The Deputy-Chairman: If the hon. Member heard the statement made by the Chairman of Ways and Means not long ago he will remember that it was pointed out that on most occasions the course which has been suggested would be attended with great disadvantages, a point of view in which I thoroughly concur. It is sometimes possible on occasions like this for hon. Members to ask privately whether their Amendments are to be called, and if possible the Chairman gives them an answer, but that is not always possible because the selection or otherwise of Amendments may depend upon the course of the discussion of some previous Amendments, which it may be impossible for the Chairman to anticipate. The question of which Amendments are to be selected is one that has been left entirely in the discretion of the Chairman, and he is not bound to give any reason for his selection.

NEW CLAUSE.—(Reduction of duties on certain licences.)

The duties on the following excise liquor licences, that is to say, retailers on-licences for spirits, beer, or wine, retailers off-licences for spirits, beer, or wine shall be reduced by twenty-five per-centum.£[Mr. Liddall.]

Brought up, and read the First time.

10.48 p.m.

Mr. Liddall: I beg to move, "That the Clause be read a Second time."
This new Clause, standing in my own name and that of several other hon. Members, is regarded, I believe, by the Chancellor of the Exchequer as a hardy annual, and it has come to be known as a hardy annual because ever since the present basis of licence duties was fixed by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) in 1910 at half the annual value of the premises for publican's licences and one-third of the same for beer-house licences, the retailers of this country have regarded it as vindictive. Since 1910 not only have the trading hours been reduced by a

half but the keenest competitor of the licence holder, the working man's club, has increased in numbers from 8,152 to 17,211—those are the latest figures available. In recent years the cinema has proved another competitor with which the average licensee cannot hope possibly to compete. The sobriety of the nation and the fact that members of the licensed trade conduct their businesses in an exemplary manner, notwithstanding the serious financial crisis through which so many of them are passing, is surely sufficient justification for their claim to consideration at the hands of the Government. For years there has been no equality of sacrifice so far as these traders are concerned. Time after time they have been promised that the consideration which is their due will be given to them when circumstances permit.
In 1929, when the right hon. Member for Epping (Mr. Churchill) was Chancellor of the Exchequer, there was an arrangement between the licensed victuallers and the Government that if the licensed victuallers were conceded a 25 per cent. reduction in duty they would withdraw their objections to the sale of half bottles of spirits by the off-section of the trade. The off-section in 1923 were allowed the half bottle concession, but the licensed victuallers got no reduction in their licence duties. In 1935 a similar Clause was given sympathetic consideration by the then Financial Secretary to the Treasury. To-night I ask that the sympathy of the Government should take a practical form and that they should remove a long standing grievance—nay, an injustice—which thousands of our loyal, honest, law-abiding licensed victuallers have had to suffer.

10.51 p.m.

The Attorney-General: The Committee has enjoyed the speech of my hon. Friend and, as he said, this proposal is to some extent a hardly annual, and we might miss it if it did not continue to appear. My right hon. Friend's predecessors have stated that there is no doubt a case for consideration, but they have not felt it in their power, as guardians of the revenue, to accept the proposal. In view of those statements, with which he is no doubt familiar, as he is familiar also with the financial needs of the country in this year of grace 1937, it will come as no surprise to him that my right hon. Friend is


unable to adopt any different attitude from that of his predecessors.

10.53 p.m.

Mr. Liddall: It is with considerable regret that I have heard the Attorney-General's speech. Before I ask leave to withdraw the Clause I might say that had I persisted and taken this to the Division Lobby, I am perfectly satisfied that we should have beaten the Government. We do not wish to defeat the Government on a question of this kind, but we hope that in 1938 they will at long last give the licence holders of this country the justice that is due to them. I beg to ask leave to withdraw the Amendment.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Repeal of s. 34 of 26 Geo. V., and I Edw. VIII., c. 34.)

Section thirty-four of the Finance Act, 1936, is hereby repealed and shall cease to have effect after the passing of this Act.—[Mr. H. G. Williams.]

Brought up, and read the First time.

10.54 p.m.

Mr. H. G. Williams: I beg to move, "That the Clause be read a Second time."
I hope that I may have the attention of hon. Members for this rather substantial constitutional issue. Last year some of us tabled an Amendment for the deletion of the Clause. Unfortunately, a public engagement in my constituency prevented my being present and the debate on that Clause did not take place. For that, I was largely to blame.
The proposed Clause raises a substantial constitutional issue. We are all familiar with the fact that there are greater checks in respect of financial legislation than of any other. Before a new tax can be imposed we have to have a Resolution in Committee of Ways and Means. That has to be reported to the House, and it is only after the report has been accepted by the House that permission is given to Mr. Chancellor of the Exchequer to introduce his Finance Bill, which is then read a First time. Then we have the Second Reading, the Committee stage and the Report stage of the Bill, and, unless we suspend our rules, those stages and the Third Reading have to be taken on separate days. With regard to expenditure, proposals have to originate in Committee of the whole House. Later

in the Session, right towards the end, we have an Appropriation Bill or a Consolidated Fund Bill, according to the circumstances, and that is passed through its various stages. After Parliament, chiefly this House, has sanctioned the raising of money by taxation and sanctioned the expenditure of money out of the Consolidated Fund, there is a very elaborate procedure to make sure that in the expenditure of the money there are no abuses.
When we pay our taxes, they are entrusted in the first place to the control of the Comptroller and Auditor-General. He is the custodian of public funds. The second part of our Income Tax is due to-day and we are supposed to have paid it. Mr. Chancellor of the Exchequer cannot spend a penny of the money because it is not in his custody. It is in the custody, in the first place, of the Comptroller and Auditor-General. When the Chancellor of the Exchequer, working through the various Departments of State, and the Paymaster-General, desires to expend money, it is first of all necessary that that money should be placed in an account on which they can operate: Until last year, the law, dating back a good many years, was that no money could be expended until two of the Lords Commissioners of the Treasury signed a requisition which they sent, at the request of the Chancellor of the Exchequer, to the Comptroller and Auditor-General, and when he received it, he tranferred from the sums under his control to the account under the control of the Treasury, the requisite fund.
In existing circumstances, we are entitled to assume that our Ministers will not dip their fingers into the till, and that our civil servants are, as we know they are, scrupulously honest. This may not matter, but the checks were imposed long ago when things were not quite as nice as they are now. None of us can say that the time will not come when circumstances in this country may be such that we can no longer accord to Ministers—I am not now thinking of political parties—the same degree of trust, or we may not be able to afford civil servants the same degree of trust, as we can to-day. Those checks, imposed by our ancestors because of corruption which existed in their day, are not likely to be removed.
I remember, many years ago, walking in St. James's Park and meeting a gentle-


man, now dead, who was a Lord Commissioner of the Treasury. My wife had not met him, and I made him acquainted. I said, addressing this gentleman, who happened to sit for a Welsh constituency: "He is a very agreeable man. Without his assistance or that of his colleagues not one penny of public money could be expended." This gentleman, who was of most meagre means and never had very much more than his Parliamentary salary, turned to my wife and said—I will not use his actual words, because I do not remember them very well—that he remembered the day on which he had signed a chit for £250,000,000. I remember the gusto with which he made that remark. The Chancellor of that day could not have expended one penny piece on the pay of the soldiers or on the purchase of munitions till two of the Lords Commissioners had signed the necessary requisition.
Last year, in Section 34 of the Finance Act, this ancient check was abolished, and I think I know why it was abolished. During the Parliamentary Recess it is necessary for the Treasury to send documents to the Lords Commissioners in order that they may sign them. We often see their signatures in these days on Orders made by the Treasury on the advice of the Import Duties Advisory Committee. Those Orders are always signed by two Lords Commissioners. In the ordinary way the bulk of us never see any signs of the administrative activities of the Lords Commissioners, but day by day they are required to sign a great number of documents, and without their signatures a great many things cannot be done. These Lords Commissioners are Members of this honourable House. They are not civil servants—and I do not want any civil servants to think that I am reflecting on them in what I say—but it is a valuable check that two people who are not normally in the ordinary pay of the State can, if they wish, resign and refuse to sign if the Chancellor of the Exchequer of the days wishes to do something improper. The resignation of two Lords Commissioners because they did not wish to do something which they knew to be wrong would be a public scandal; it would be something which would obviously imperil the continued existence of the Government of the day.—[HON. MEMBERS "Hear,

hear.") I hope that hon. Members opposite will not treat with levity something which I am raising, not for amusement nor through any hostility to His Majesty's Government, but as one of the defenders of those constitutional and financial principles which our Parliament has established, which very few other Parliaments outside the British Empire have established, and which are one of the reasons why democratic institutions work in this country.
What is the alteration made? The Section passed last year says that if not more than one of the Lords Commissioners is available, the requisition can be signed by one of them and one of the Secretaries to the Treasury—that is to say, by a civil servant—or by one of such other officers of the Treasury as the Treasury may prescribe. It goes on to say that if no Lord Commissioner is available, then it can be signed by two of the Secretaries to the Treasury or by one of the Secretaries and one of the other prescribed officers. In other words, by Section 34 of the Act of last year the House of Commons, without realising it, sacrificed its effective control over the money paid in taxes, in one sense. Up to that time not a penny piece of money could be spent in this country by the Government unless two hon. Members of this House who happened to be Lords Commissioners signed the requisition. By what we did last year during a holiday period, when quite properly Lords Commissioners had gone away, we sacrificed our control. But in the old days arrangements were always made that at least two Lords Commissioners should be available, I do not say in London, but could be easily obtained. That check, which does not matter at this moment, has gone.
I am not concerned with this moment. I do not think the right hon. Member for Spen Valley (Sir J. Simon) is going to run away with the till, and I do not think any of those gentlemen, whom many of us know, who are civil servants in the present Treasury, will do that kind of thing. One can never tell in this life what changes may come, and I think the Government were wrong last year in putting that Clause into the Bill. I myself was blameworthy, because I did not take more trouble to see that I was here to protest against it, for I had the notice on the Order Paper. It was my fault, and I blame myself. This is the


first opportunity of raising the matter that has arisen since. It is a first-class constitutional issue in the long run, and I hope that the Chancellor of the Exchequer—whether he is willing to accept my proposed new Clause I do not know; I hope he will—will take the most serious note of the points I have placed before the Committee. This has nothing to do with party divisions; it is the abolition of a check which was inserted in our Constitution, I think 150 years ago, and which by chance was swept away last year without any hon. Member, broadly speaking, realising what happened; and I hope that, even at this late hour, hon. Members will take notice of the point I have raised. It is not of immediate importance, but one cannot say when it may not become of fundamental constitutional importance to make sure that the public funds of this country are not to be expended, at some conceivable time in the future, in a manner which in fact would be to disobey the orders of the House as expressed in the Consolidated Fund 13iIl. For these reasons, I beg to move.

11.8 p.m.

Mr. Holdsworth: I attached my name to this Clause at the request of the hon. Member for South Croydon (Mr. H. G. Williams), and I want to take this opportunity of congratulating him on a speech that ought to interest Members in every quarter of the Committee. I do not want to go over the historical ground of the safeguards in regard to expenditure, but I want to draw the attention of the Committee to the fact that we have seen in the last few years dictator governments of different complexions arising in all parts of the world. I am not going to suggest for a moment that there will be such a government in this country, but I think we ought to do nothing that would encourage the exercise of greater bureaucratic powers without control by the House of Commons.
We are placing civil servants in an impossible position. I believe we have the finest Civil Service in the world. Like the hon. Member for South Croydon, I would not like it to be thought for a moment that I was thinking of the present Civil Service. Men who are dependent for their living on obeying the behests of a Ministry must find it very difficult indeed to refuse the request of any Ministry, but I believe that, under the Clause

of last year, these men must give way if they are requested by a Chancellor of the Exchequer. It may be said with some degree of truth that the Lords Cornmissioners—I do not say it in any insulting way—perhaps act purely automatically, and do not examine the chits which they are signing; but at least it remained, up to last year, a fact that the real control resided in the House of Commons, whereas the Amendment made to the Finance Bill last year, while not in the full sense of the word taking away the control of the House, at least took away a safeguard which had been in existence in previous years whereby the House had a greater amount of control.
I want to appeal to the Chancellor of the Exchequer. The new Clause last year was probably put in for administrative reasons. Probably at some time in the Recess all the Lords Commissioners of the Treasury may be away. Surely there could be some arrangement for one of them to be present in order that we might keep in being the safeguards which have been given us as a heritage froth the past. I do not want the Clause to be treated as if it was a party question of no serious import, and I beg the Committee to persuade the Chancellor, if he is not already persuaded, to let us keep in this Mother of Parliaments every safeguard we can to see that the privileges we now enjoy shall not be thrown away but shall be retained in their entirety.

11.11 p.m.

Sir J. Simon: I take great interest in constitutional discussions and I hope I am as anxious as any Member of the Committee to secure our ancient heritages and to prevent us from taking any step in the direction of dictatorship and to insist on the supremacy of the House of Commons in matters of finance. All these propositions are of very great value and I respect them as some of the most important propositions in public life. But I think a little more is being made of this provision than it deserves. There might be an occasion when it was of the greatest possible importance that prompt authority should be given in the name of the Commissioners of the Treasury for the carrying out of a decision already arrived at by Parliament. In the ordinary way that authority would be given by the signature of two Commissioners of the Treasury. The First


Lord of the Treasury, the Prime Minister or the Chancellor of the Exchequer might be available. Other Lords of the Treasury, who also act as Government Whips, will probably be available. That is the ordinary way in which it is done. But it was realised that a situation might conceivably arise in which you might not have two of these Commissioners available and the Act provided that the signature of one of them and of one of the Secretaries to the Treasury would do. My hon. Friend was mistaken in thinking that the Secretaries to the Treasury referred to are necessarily civil servants. The Financial Secretary or the Parliamentary Secretary under this provision might sign. You might conceivably have a case in which they will not be available, in which case there is the third Secretary to the Treasury, the permanent head of the Department. It is even possible for the Treasury to appoint officers from time to time to fulfil the duty.
The Section having been passed, the Treasury on 17th August made a minute directing who all the persons referred to should be. I hope my hon. Friends will be gratified to know that no single instance has occurred up to date when it has been necessary to take advantage of these arrangements. In no single instance, up to the present, has the Constitution been seriously undermined. But no sort of injury having happened, and this being the Section which was passed last year, now, 12 months later, without the slightest difficulty ever having occurred, we are invited to cancel what we did last year. The tombstone which ought to be erected over Section 34 of the Finance Act: 1936, is the tombstone which was erected over the baby which died soon after birth:
If I was so soon to be done for,
I wonder what I was begun for.
I cannot take the solemn view about this which was suggested. I think that the hon. Member for South Bradford (Mr. Holdsworth) went so far in his speech as to speak of civil servants who depend upon the whim of the Minister for their livelihood.

Mr. Holdsworth: If I did, I withdraw the remark. I do not think that I used those words, and if I did I certainly did not intend to do so.

Sir J. Simon: I only meant by this that I wanted my hon. Friend to realise that the civil servants have the most secure position in this country that anybody could have. They do not depend upon the whim of any Minister at all. The fact that a Chancellor of the Exchequer may not always approve of the advice given to him by a permanent civil servant does not entitle him to give him a month's notice or a month's wages. They have the most carefully guarded rights which, of course, everybody respects, and I think that it is a highly artificial idea to suppose that if this emergency did arise, which I do not suppose it would, it could be imagined that it would be better for the public service to suffer, perhaps, because although Parliament had authorised a payment it could not be done in two or three days for the reason that it was in the middle of a holiday. Yet all the time you have the most responsible civil servants in the Treasury, who, if necessary, could join in carrying out that desire. I agree that these constitutional questions have far more importance than many people are willing to give them credit for, but I still think that it is hardly a case for reversing the decision which Parliament made last year, and made quite deliberately, I hope that the Committee on this occasion will be prepared to preserve the Section and regard it as purely a provision in case of emergency for the general public good.

11.18 p.m.

Mr. H. G. Williams: I am frankly appalled at the reply of the Chancellor of the Exchequer. This provision was passed 71 years ago by a Liberal Government, and for 70 years there was not a single case where it was necessary to depart from it except for a certain amount of occasional inconvenience because they had to send a Treasury bag by train to some place at which a Lord Commissioner was then staying. There are five of these gentleman who can serve, and certainly there ought to be two of them within a reasonable distance. We passed through the great War when there were far greater emergencies than had ever before been experienced without the necessity of breaking this rule, which a Liberal Government thought it proper to incorporate in an Act 71 years ago. The Chancellor of the Exchequer reproved the hon.


Gentleman the Member for South Bradford (Mr. Holdsworth) because, he said, Civil servants were subject to the whim of the Chancellor of the Exchequer.
The Chancellor of the Exchequer tried to suggest that the civil servant is protected against the Minister. Normally he is, but I would remind the Committee that the civil servant holds his office at pleasure. He can be dismissed at a moment's notice. The fact that nothing has happened during the last 12 months has nothing to do with it. I am looking to the time—I hope it will never come—when we may have profound changes in this country. We may have something in the nature of a dictatorship. In those circumstances the Chancellor of the Exchequer may advise His Majesty to dismiss a civil servant and that civil servant will be dismissed. No civil servant has the faintest security in those circumstances. If the Chancellor of the Exchequer says to the other prescribed officers: "You are to resign," can anyone imagine a civil servant refusing a point blank order of that kind? On the other hand, suppose the Chancellor of the Exchequer says that to two Lords Commissioners, Members of this House, holding a position not dependent on the Government circumstances in which their resignation would imperil the existence of the Government. Those two Lords Commissioners resign, and if it is stated that the reason was because the Chancellor of the Exchequer had asked them to authorise the expenditure of public money, improperly, the life of that Government would not be worth two minutes purchase. The Chancellor of the Exchequer has not in the least faced up to the constitutional position. No one expected that this would make the slightest difference in the last 12 months. I must say this to the credit of the Liberal Chancellor of the Exchequer, that the Liberals did try to defend this principle—[An HON. MEMBER: "Always try to speak well of the dead!"] The hon. Member must not be too much concerned over what he has seen in the evening papers about St. Ives. We are up against one of those really permanent things. Why at the beginning of each Parliamentary Session, after we have listened to the King's Speech in the House of Lords, do we introduce a Bill about Select Vestries or Outlawry? It is an assertion of our rights to consider our

business irrespective of His Majesty's requests. Why do we bang the door in the face of Black Rod? Not because we are afraid of that genial retired General who comes to deliver a Gracious Message, but because we are reminded of a certain event that happened. I am not sure whether it was Charles I or Cromwell. Cromwell came with his soldiers to arrest the five Members. [Laughter.] Hon. Members laugh. Charles came with his soldiers to arrest the five Members who had escaped by boat. Cromwell came and was much more effective. He escaped with the Mace. I am never quite certain why we bang the door in the face of Black Rod. We did it to-day, when we had a Royal Commission. He interrupted my speech. I take the view that at this time when the principles of democratic Government are challenged we should not let go one of these things. Therefore, I hope the Chancellor of the Exchequer will be willing to give further consideration to this matter than he has indicated in his speech.

11.24 p.m.

Mr. Ede: One hon. Member has revealed in his last few sentences why he has taken this sudden interest in this subject. I regret that his speech was interrupted earlier in the day. At this late hour Black Rod would have no nefarious designs on him or anybody else. I do not subscribe to the principle laid down by the hon. Member for South Croydon (Mr. H. G. Williams) that we are in a less safe constitutional position because certain secretaries of the Treasury and other high officials have been invested with this power. These people are as much amenable to this House if they obey an order of a Minister who is acting contrary to the desires of this House, as any Minister. The resignation of a permanent civil servant on the ground that he had been ordered to do an illegal act by a Minister of the Crown who was acting in defiance of the authority of this House would attract far more attention than the resignation of a junior Whip who may have been disappointed that he had not received promotion. I guarantee that if the Permanent Secretary to the Treasury, who is the head of the Civil Service in England, failed to do the necessary things on an order he had received from a Minister and resigned or was dismissed by the


Minister because he had refused to act, it would be a first-class sensation in the present constitutional position. I do not imagine that if we have to face a dictatorship, the kind of safeguard which is provided by this procedure is going to help us at all.
I think the Committee may be grateful to the hon. Member for South Croydon for raising the issue, and, suspicious as I am of His Majesty's Government, and willing at all times to believe the worst about them, I think the hon. Member has attempted to make our flesh creep on an issue which is purely artificial, and that we must rely, not on a couple of junior Lords of the Treasury, but in the end upon the honesty and integrity of the civil servant who now has to advise them, and who in future will have to advise them. Are we to understand that hon. and right hon. Members who are promoted to that Bench because they are of no use elsewhere really do anything in these matters other than act on the suggestions of highly placed civil servants to sign a particular document on an imaginary line and without having any dots to guide their signature? I hope that if we have to face a dictatorship, we shall have something stronger upon which to rely than a safeguard inserted 71 years ago in an Act of Parliament which lasted until last year. I think the Committee may very well pass to the next business after thanking the hon. Member for having confused Cromwell and Charles I in a way which shows that his Liberalism has never been very robust.

11.28 p.m.

Mr. Garro Jones: Without contradicting what my hon. Friend has said, I am wondering what would be the position if the present occupants of this Front Bench had been on the Government Front Bench and moved last year to remove this safeguard. I wonder what they would say if they were in the position of the right hon. Gentleman in defending the removal of that safeguard. We should have all kinds of sinister motives imputed to us. I must confess that when I heard the Chancellor of the Exchequer replying, I had the impression that had he not been so absorbed in the details of the Finance Bill, he might have taken a different attitude, and certainly had he been sitting

upon this Bench, I believe he, would have taken an opposite view. The hon. Member for South Shields (Mr. Ede) stated that it would create a much deeper impression upon the public mind if a civil servant resigned than if a Lord of the Treasury resigned, and I do not dissent from that view; but the point is that civil servants are not so likely to resign when their whole living depends upon their remuneration as the Lords of the Treasury, whose living is not supposed to depend entirely upon such remuneration as they receive for their Parliamentary duties.
One of the reasons which the Chancellor gave in favour of allowing the law to remain as it is was that it had not been necessary to put this new procedure into operation during the last twelve months. That appears to me to be a Stronger argument in favour of its removal than of its retention. The right hon. Gentleman went on to say that there were difficulties about the availability of the Lords of the Treasury. I believe it is not wrong to say that there are ten officials who are able to sign these documents under the old procedure. We have many important functions of State in which we rely upon one Minister or at any rate two. Therefore, I suggest that it is not too much to ask that at least one out of the ten should be present to carry out these tasks.
I think that this is worthy of the consideration of every hon. Member. The officials who are now empowered to sign these Orders are officials who are appointed by Treasury Minute. It is true that under our present system the Secretary of the Treasury is immune from all suspicion; he is a man of the highest integrity; but if our system began to change in any unfortunate direction—hon. Members may take it as going either towards the Right or towards the Left—it would not only be a Parliamentary system that would be changed, but gradually there would be broken down the system and safeguards which may change the integrity of our civil servants. In the hour Of safety we are always inclined to despise and minimise precautions which, in the hour of danger, we regret having removed; and although I do not consider that we are confronted with any immediate dangers, I think we ought to be extremely slow in removing those safeguards under which our financial system has worked so


well. If the hon. Member for South Croydon (Mr. H. G. Williams) presses this to a Division, I shall in all sincerity give him my support.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 102; Noes, 163.

Division No. 255.]
AYES
[11.33 p.m.


Adams, D. (Consett)
Griffiths, J. (Llanelly)
Parker, J.


Adams, D. M. (Poplar, S.)
Hall, G. H. (Aberdare)
Parkinson, J. A.


Adamson, W. M.
Hall, J. H. (Whitechapel)
Price, M. P.


Alexander, Rt. Hon. A. V. (H'lsbr.)
Harris, Sir P. A.
Pritt, D. N.


Anderson, F. (Whitehaven)
Henderson, J. (Ardwick)
Rathbone, Eleanor (English Univ's.)


Banfield, J. W.
Hills, A. (Pontefract)
Ridley, G.


Barr, J.
Hollins, A.
Ritson, J.


Bellenger, F. J.
Jagger, J,
Robinson, W. A. (St. Helens)


Brown, C. (Mansfield)
Jenkins, A. (Pontypool)
Rothschild, J. A. de


Buchanan, G.
Jenkins, Sir W. (Neath)
Rowson, G.


Burke, W. A.
John, W.
Seely, Sir H. M.


Cape, T.
Jones, A. C. (Shipley)
Silkin, L.


Charleton, H. C.
Kelly, W. T.
Simpson, F. B.


Chater, D.
Kirby, B. V.
Smith, Ben (Rotherhithe)


Cluse, W. S.
Kirkwood, D.
Smith, E. (Stoke)


Cocks, F. S.
Lathan, G.
Smith, T. (Normanton)


Cove, W. G.
Lawson, J. J.
Sorensen, R. W.


Cripps, Hon. Sir Stafford
Leach, W.
Stephen, C.


Daggar, G.
Lee, F.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Davidson, J. J. (Maryhill)
Leslie, J. R.
Strauss, G. R. (Lambeth, N.)


Davies, S. O. (Merthyr)
Lunn, W.
Taylor, R. J. (Morpeth)


Day, H.
McEntee, V. La T.
Thurtle, E.


Dobbie, W,
McGhee, H. G.
Tinker, J. J.


Dunn, E. (Rother Valley)
MacLaren, A.
Walkden, A. G.


Evans, E. (Univ. of Wales)
MacMillan, M. (Western Isles)
Watkins, F. C.


Foot, D. M.
Mainwaring, W. H.
Westwood, J.


Frankel, D.
Marshall, F.
Whiteley, W. (Blaydon)


Gallacher, W.
Mathers, G.
Wilkinson, Ellen


Gardner, B. W.
Maxton, J.
Williams, T. (Don Valley)


Garro Jones, G. M.
Messer, F.
Windsor, W. (Hull, C.)


Green, W. H. (Deptford)
Morrison, Rt. Hon. H. (Hackney, S.)
Woods, G. S. (Finsbury)


Greenwood, Rt. Hon. A.
Morrison, R. C. (Tottenham, N.)
Young, Sir R. (Newton)


Grenfell, D, R.
Noel-Baker, P. J.



Griffith, F. Kingsley (M'ddl'sbro, W.)
Oliver, G. H.
TELLERS FOR THE AYES.—


Griffiths, G. A. (Hemsworth)
Paling, W.
Mr. H. C. Williams and Mr.




Holdsworth.




NOES.


Adams, S. V. T. (Leeds, W.)
Donner, P. W.
Hepworth, J.


Albery, Sir Irving
Drewe, C.
Herbert, Major J. A. (Monmouth)


Anstruther-Gray, W. J.
Duckworth, W. R. (Moss Side)
Higgs, W. F.


Apsley, Lord
Duggan, H. J.
Hills, Major Rt. Hon. J. W. (Ripon)


Aske, Sir R. W.
Duncan, J. A. L.
Horsbrugh, Florence


Astor, Hon. W. W. (Fulham, E.)
Eckersley, P. T.
Hudson, Capt. A. U. M. (Hack., N.)


Baillie, Sir A. W. M.
Ede, J. C.
Hutchinson, G. C.


Baldwin-Webb, Col. J.
Edmondson, Major Sir J.
Keeling, E. H.


Balfour, Capt. H. H. (Isle of Thanet)
Edwards, Sir C. (Bedwellty)
Kerr, J. Graham (Scottish Univs.)


Beauchamp, Sir B. C.
Elliot, Rt. Hon. W. E.
Law, R. K. (Hull, S.W.)


Beaumont, Hon. R. E. B. (Portsm'h)
Ellis, Sir G.
Leckie, J. A,


Bossom, A. C.
Elliston, Capt. G. S.
Leighton, Major B. E. P.


Boyce, H. Leslie
Elmley, Viscount
Liddall, W. S.


Brass, Sir W.
Emrys-Evans, P. V.
Llewellin, Lieut.-Col. J. J.


Briscoe, Capt. R. G.
Entwistle, Sir C. F.
Loftus, P. C.


Brocklebank, Sir Edmund
Erskine-Hill, A. G.
Lyons, A. M.


Bull, B. B.
Everard, W. L.
Mabane, W. (Huddersfield)


Bullock, Capt. M.
Fildes, Sir H.
MacAndrew, Colonel Sir C. G.


Butcher, H. W.
Fremantle, Sir F. E.
McCorquodale, M. S.


Carver, Major W. H.
Furness, S. N.
MacDonaid, Rt. Hon. M. (Ross)


Cary, R. A.
Ganzoni, Sir J.
Macmillan, H. (Stockton-on-Tees)


Castlereagh, Viscount
Gluckstein, L. H.
Magnay, T.


Clarke, Lt.-Col. R. S. (E. Grinstead)
Goldie, N. B.
Margesson, Capt. Rt. Hon. H. D. R.


Cobb, Captain E. C. (Preston)
Grimston, R. V.
Mayhew, Lt.-Col. J.


Colman, N. C. D.
Gritten, W. G. Howard
Mellor, Sir J. S. P. (Tamworth)


Colville, Lt.-Col. Rt. Hon. D. J.
Guest, Lieut.-Colonel H. (Drake)
Mills, Major J. D. (New Forest)


Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Guest, Maj.Hon.O. (C'mb'rw'll, N.W.)
Morrison, G. A. (Scottish Univ's.)


Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Guinness, T. L. E. B.
Muirhead, Lt.-Col. A. J.


Cox, H. B. T.
Gunston, Capt. D. W.
Munro, P.


Cranborne, Viscount
Guy, J. C. M.
Neven-Spence, Major B. H. H.


Craven-Ellis, W.
Hannah, I. C.
Nicolson, Hon. H. G.


Croft, Brig.-Gen. Sir H. Page
Hannon, Sir P. J. H.
Orr-Ewing, I. L.


Crooke, J. S.
Hartington, Marquess of
Patrick, C. M.


Crookshank, Capt. H. F. C.
Haslam, Sir J. (Bolton)
Peake, O.


Cruddas, Col. B.
Heilgers, Captain F. F. A.
Petherick, M.


Conant, Captain R. J. E.
Heneage, Lieut.-Colonel A. P.
Pilkington, R.


Dixon, Capt. Rt. Hon. H.
Hepburn, P. G. T. Buchan-
Ponsonby, Col. C. E.




Procter, Major H. A.
Savery, Sir Servington
Touche, G. C.


Radford, E. A.
Scott, Lord William
Tree, A. R. L. F.


Raikes, H. V. A. M.
Selley, H. R.
Tryon, Major Rt. Hon. G. C.


Ramsbotham, H.
Shakespeare, G. H.
Tufnell, Lieut.-Commander R. L.


Rankin, Sir R.
Shaw, Major P. S. (Wavertree)
Turton, R. H.


Rayner, Major R. H.
Simon, Rt. Hon. Sir J. A.
Wakefield, W. W.


Reed, A. C. (Exeter)
Smith, Bracewell (Dulwich)
Walker-Smith, Sir J.


Reid, J. S. C. (Hillhead)
Somervell, Sir D. B. (Crewe)
Wallace, Capt. Rt. Hon. Euan


Reid, W. Allan (Derby)
Southby, Commander Sir A. R. J.
Ward, Irene M. B. (Wallsend)


Remer, J. R.
Spens, W. P.
Waterhouse, Captain C.


Rickards, G. W. (Skipton)
Stanley, Rt. Hon. Oliver (W'm'ld)
Watt, G. S. H.


Ropner, Colonel L.
Strauss, H. G. (Norwich)
Wickham, Lt.-Col. E. T. R.


Ross Taylor, w. (Woodbridge)
Strickland, Captain W. F.
Winterton, Rt. Hon. Earl


Rowlands, G.
Stuart, Hon. J. (Moray and Nairn)
Womersley, Sir W. J.


Russell, S. H. M. (Darwen)
Sueter, Rear-Admiral Sir M. F.
Wright, Squadron-Leader J. A. C.


Salmon, Sir I.
Sutcliffe, H.
Young, A. S. L. (Partick)


Samuel, M. R. A.
Thomas, J. P, L.



Sanderson, Sir F. B.
Thomson, Sir J. D. W.
TELLERS FOR THE NOES.—




Mr. Cross and Captain Dugdale.


Question, "That the Clause be read a Second time," put, and agreed to.

NEW CLAUSE.—(Discount on payments of income tax in advance.)

Section one hundred and fifty-nine of the Income Tax Act, 1918 (which provides for a discount on payments in advance, subject to request made at the time of payment), shall have effect as if the words "shall make an allowance" were substituted for the words "on request made at the time of payment may make an allowance."—[Mr. Keeling.]

Brought up, and read the First time.

11.42 p.m.

Mr. Keeling: I beg to move, "That the Cause be read a Second time."
This Clause deals with a simple point. Under Section 159 of the Income Tax Act, 1918, if any tax under Schedule D is paid before it is due, the Inland Revenue may—not "shall"—allow a discount of 2½ per cent. per annum provided it is claimed at the time the tax is paid. The extent to which this provision is used is shown by the fact, as the Financial Secretary said in reply to a question, that £70,000 was paid last year in discount. Schedule D is payable in two instalments, in January and July, and as the assessments are usually received in the previous November, as much as seven months' discount can be claimed in respect of the second instalment. Assuming for the sake of a rough calculation that the average period of payment in advance is three months, we get the result that over £10,000,000 of Income Tax last year was paid in advance. Obviously the provision is valuable to both sides. A gilt-edged investment for a few weeks yielding 2½ per cent. per annum does not grow on every tree. There is also the advantage to the Revenue that they not only get the use of this money in advance, but, human nature being what it is, they probably get money which, if discount

were not allowed, would not be paid until some weeks or months after the due date. Under the present provision, however, there are two pitfalls for the taxpayer. The first is that the discount cannot be claimed as a right. It rests with the Inland Revenue to say whether it shall be paid or not. The second pitfall is that the discount has to be claimed at the time of payment. If the taxpayer sends his cheque to-day and discovers to-morrow that he can claim discount, it is too late.
My new Clause is designed to meet both those points. I propose to substitute "shall" for "may," and I cannot think that will create any difficulty. One of those retired Income Tax inspectors whose experience in Income Tax practice is so useful to the citizen tells me that in the whole course of his experience there was never a case within his knowledge where this discount was refused if properly claimed. I feel confident, therefore, that my right hon. Friend will accept that part, at any rate, of the Clause. As regards the other point, I would remind hon. Members of an indignant letter in the "Times," to which attention was drawn in the House a few months ago, which was signed "Peer of the Realm." It was a bitter complaint of what the writer regarded as sharp practice on the part of the Inland Revenue, because he was refused a discount a few days after he had paid the tax. Perhaps the bitterness of the peer of the realm was increased by the knowledge that though peers are taxed like everybody else they have no hand in framing the taxes. Of course it was not really sharp practice, because the law says quite clearly that the discount must be claimed at the time of payment, but it


has, I think, to the ordinary person who has not studied the statute, the appearance of sharp practice, for the reason that it differs from commercial custom. In business if a man buys goods on the terms that if he pays promptly he will get a discount he gets that discount whether he claims it or not. In these days of ever-increasing burdens on taxpayers I submit to my right hon. Friend that the relations between the taxpayer and the taxgatherer should be as sweet and reasonable as possible, and that the manners and customs of the Inland Revenue should be assimilated as far as possible to the manners and customs of the best commercial firms.
I have another reason for proposing this new Clause. The rule dates back 138 years. I have traced it back from the Income Tax Act, 1918, to Peel's Act of 1842 and to Pitt's Act of 1799. The provision in Pitt's Act, which is 39 and 40 Geo. III C. 22, S. 31, reads:
If any person shall be desirous of paying the tax in advance at the Bank of England it shall be lawful for the cashier of the Bank of England on production of the notice of assessment to make an allowance of five per cent. per annum.
In spite of the distrust felt by the hon. Member for South Shields (Mr. Ede) for archaic safeguards, the fact that a law is 138 years old is not necessarily in its disfavour. But in 1799, when that law of Pitt's was passed, cheques were not in use and payment in cash across the counter of the bank was the only method of paying Income Tax. I suggest that it is reasonable to assume that a decent cashier at a decent bank like the Bank of England would draw the attention of the man who was paying the tax in cash to the fact that he was entitled to a discount. It therefore seems unreasonable to maintain a rule made 138 years ago in the entirely altered conditions of to-day.

11.51 p.m.

Sir J. Simon: I think the Committee are indebted to the hon. Member for an interesting speech and for the result of his researches, which take us back to the time of Sir Robert Peel and Mr. Pitt. The truth is that this is a very ancient arrangement, and the Royal Commission on Income Tax some years ago dealt with it in their report and expressed the opinion that any provision for discount was out of place in our present Income

Tax law. But it is in fact in the Statute. I am not proposing, at any rate in this Finance Bill, to get rid of it. But there is a practical reason why I have no desire to encourage this. It is true that it is convenient if people more than punctually pay their taxes, because you have not got to pursue them, but, whereas the Exchequer can borrow on a Treasury bill at ½ per cent., the Treasury has to pay 2½ per cent. for the use of the money which is paid to it before the due date. I think I must leave the word "may," but our practice has been to allow it. There is, however, this point. If this is part of the Income Tax arrangements, I understand the feeling of somebody who, having paid a cheque, is reminded of this right but who, going the next day to ask for this concession, is refused it. That is what the present Statute amounts to, and it is not very desirable.
I should therefore be prepared to make a modification to this sort of effect: that there should be an interval—I do not think that it should be too long, say a month—after the date on which the tax has been paid during which it is open to the taxpayer to make application for the allowance to be made. I do not think that we can do that with quite trifling amounts. But if my hon. Friend will withdraw this proposal I will, on the Report stage, bring up a scheme on the basis I have described. I am not at all satisfied that the system of giving discount before the due date is in the interests of the Treasury. Still, there is something to be said both ways, and as long as it is on the Statute Book it is a little sharp to say to a man, "You would have been perfectly right if you had asked for it on the nail, but you cannot have it if you ask for it afterwards." If my hon. Friend will withdraw his Clause I will see what can be done.

11.55 p.m.

Mr. Keeling: I think that the month suggested is rather a short time, and I would ask my right hon. Friend to consider before the Report stage—I do not ask for an answer now—whether it could be increased. Alternatively, I would suggest for his consideration that, in addition to that one month being given, instructions should be issued administratively—we do not want to change the law—to the Inland Revenue


that if the amount of the discount exceeds some reasonable minimum, such as 10s. or £1, the taxpayer should be written to and told that the money is due. I would also ask the right hon. Gentleman to consider again whether he could not alter the word "may" so as to make the discount mandatory on the Treasury insttad of being an act of grace? I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Amendment of 1 Geo. V., c. 8, s. 43, 18 and 19 Geo. V., c. 10, s. 6, and 19 and 20 Geo. V., c. 17, s. 5, in respect of mead.)

Section forty-three of the Finance Act, 1910, section six of the Finance Act, 1927, and section five of the Finance Act, 1928, shall not apply to the manufacture or sale of mead made from honey produced in Great Britain or to such mead sent out from the premises of a maker of sweets for sale.—[Mr. Turton.]

Brought up, and read the First time.

11.56 p.m.

Mr. Turton: I beg to move, "That the Clause be read a Second time."
This is not a hardy annual; it has occurred only once before when my hon. Friend the Member for Skipton (Mr. Rickards) raised the point in a new Clause last year. The then Chancellor of the Exchequer, now the Prime Minister, said in reply that he would give the matter further consideration if he could have proof of the commercial production of mead. In compliance with that suggestion I sent to him a half-bottle of mead. I had a private letter from him in which he gave me a description of his feelings after drinking the half-bottle of mead, but it would not be in order for me to give to the Committee the full details of that letter. I hope that the present Chancellor of the Exchequer may be able to make this concession if a full bottle is sent.
What is the justice of this case? Mead was always free of duty or licence until the 1910 Budget, when, without being mentioned, it was brought within the ambit of the Section which I wish to repeal. Mead has a long history. It was the staple drink of the Greeks and Romans, and they thrived upon it. It was the drink on which our ancestors in this country used to live, and it was the basis of Merrie England in mediaeval times. I find mead even later than that.

I have a large encylopaedia of mead quotations, of which I will read only one. In 1850, when Sydney Smith was writing his "Moral Philosophy," he said these words:
Every clergyman's wife makes mead wine of the honey.
I am afraid that, since the 1910 Finance Act, clergymen's wives have no longer made mead wine from the honey, because of the duty of 1s. 6d. per gallon and a licence of £5 5s. for making mead for sale. These sums may seem small to hon. Members, but they are a real prevention to mead being commercially made in the villages. It is the ancient village drink. It is not intoxicating and is medicinal. Mead is a great cure for rheumatism and gout. That was one of my reasons for sending it to the Chancellor of the Exchequer. Hon. Members may know that the cure for rheumatism or gout is to be stung by bees; but it is a far more pleasant way to drink a half-bottle of mead. I do not believe there would be any loss to the Revenue, because these duties are so stifling the production of mead that people dare not sell it now. We make it in Yorkshire, and we could make it in far larger quantities if only the duty was taken off. At present we have to make it in small quantities and give it away to the Chancellor of the Exchequer and other Members of Parliament and people of that sort, and it is very bad for the trade of the North Riding of Yorkshire. Mead is also made in Wales. I believe the Welsh people have a happy knack of not paying these Excise licences.

Mr. J. J. Davidson: On a point of Order. Is the hon. Member seriously suggesting that it is the practice of hon. Members opposite to send presents to their chiefs?

Mr. Turton: I fear that I did not make myself clear to the hon. Member. He will probably remember that in the Debate last year the Chancellor of the Exchequer, quite rightly, said that he would require proof that mead was commercially made. I thereupon sent him a bottle. [An HON. MEMBER: "A half-bottle, you said."] Well, a small bottle, with the proper label on it, and he drank the contents. I sent it to show its medicinal qualities, and it had such an effect that the late Chancellor of the Exchequer has now risen to the greatness of becoming Prime Minister.

Mr. Stephen: Send us a bottle.

Mr. Turton: If I send a bottle from my constituents, they will get no money for it, or the Chancellor will come down and require five guineas for making it and is. 6d. per gallon licence duty. That is the hardship. We want to help the rural industries in the country, and I hope the Chancellor of the Exchequer will make this small concession and give pleasure to these people.

12.3 a.m.

Sir J. Simon: We have had a delightful speech from my hon. Friend the Member for Thirsk and Malton (Mr. Turton), filled with the murmuring of bees, the gathering of honey, and all the delightful associations of the country, and I am afraid the fact remains that mead is an alcoholic drink and that it is made by the fermentation of honey, and the liability that rests on the makers and sellers of alcoholic drinks to pay a duty is undoubted. I apologise to my hon. Friend, but so unimaginative is the language of the Parliamentary draftsman that this beverage is in fact included in the Statute Book under the expression "sweets." There really is, I am afraid, no reason why it should be omitted from the scheme of the taxation of alcoholic liquors, though the qualities ascribed to it by my hon. Friend and the considerable publicity which it will thus have received will, I hope, be quite sufficient to make this delectable beverage well able to bear any duty that may be imposed upon it. As my hon. Friend has offered to let me have a little, I shall be more than pleased to receive it. I recall a passage from Milton's "Lycidas." I cannot quote too much of it, but there is a part of it which bears apparently on this subject. One of the passages is about how in the end fame in all these matters depends on the view
of all-judging Jove;
As he pronounces lastly on each deed,
Of so much fame in Heaven expect thy meed.

12.5 a.m.

Mr. Davidson: I am very pleased that the Chancellor of the Exchequer has taken a firm stand against the tempting offer that has been made to him by the hon. Member. I hope, however, that in his poetical quotations in future he will show the evil of this particular item, and I think that Omar Khayyam has given him, right through his poems, a very good

indication of the evil of accepting gifts of this description. I would utter a word of warning to the Chancellor of the Exchequer in case he may change his mind in the future on this subject. It has been intimated that the present Prime Minister received a present of this particular commodity, and I trust that the Chancellor of the Exchequer will take very grave warning from the type of baby he is now holding as to the effect of mead.

12.6 a.m.

Mr. Turton: I would point out to the hon. Member that his party went into the Lobby last year in favour of taking off this duty on mead, so that he is acting in contradiction of the policy of his party last year. I should like to ask one question before asking leave to withdraw the Clause. If I sent the Chancellor of the Exchequer a bottle, will he reconsider this matter before the next Finance Bill?

Sir J. Simon: Yes, Sir.

Mr. Turton: I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Reduction of duty on certain tricycles.)

(1) The rate of the duty chargeable in respect of tricycles under section thirteen of the Finance Act, 1920, shall, in the case of tricycles neither constructed nor adapted for use nor used for the carriage of a driver or passenger, be reduced to two pounds; and accordingly the following sub-paragraph shall be substituted for sub-paragraph (c) of paragraph one of the Second Schedule to that Act—

(c) tricycles—


neither constructed nor adapted for use nor used for the carriage of a driver or a passenger
£2


other tricycles
£4

(2) This section shall come into operation on the first day of January, nineteen hundred and thirty-eight.— [Mr. H. G. Williams.]

Brought up, and read the First time.

12.7 a.m.

Mr. H. G. Williams: I beg to move, "That the Clause be read a Second time."
I understand that a new kind of tradesman's tricycle has been invented, on which no one rides, but which is propelled by a motor while the man walks alongside. The distance travelled by


these vehicles daily is so small that they ought not to be taxed on the same basis as ordinary motor tricycles, and my proposal is that the duty should be reduced by one-half. I understand that this proposal is not looked upon in too unfriendly a light by those in authority, and therefore I hope I may have better success than I had with my last Clause, on which to my great regret, I was forced to divide the Committee.

The Parliamentary Secretary to the Ministry of Transport (Captain Austin Hudson): This is a new type of vehicle. We have examined the Clause, and we think it is fair, and hope the Committee will accept it.

12.8 a.m.

Mr. Alexander: I think we ought to know a little more about this matter. We know something about trade vehicles. We know that there has been a great increase in the last two or three years in the number of three-wheeled vehicles which have a seat for the driver, but here is a proposal relating to a vehicle which is capable of moving on the road while the poor worker has to walk behind. I am not in favour of an extension of that kind of employment. Why should not the men who use these vehicles be able to ride on them? What right have we to give a special subsidy by taxation to a motor vehicle which will compel an extension of pedestrianism, instead of allowing the worker to ride? I think that, before the Government accepted this Clause, we ought to have had a far better explanation as to what the vehicle is, what it is used for, and how much it is going to affect the question of riding or walking on the part of the persons concerned.

Mr. H. G. Williams: I think I can give an answer which will satisfy the right hon. Gentleman. I understand that those who walk buy more goods from the cooperative societies than those who ride in motor cars, and in these circumstances I hope he will support my proposal.

Mr. Alexander: I do not think we ought to come to a decision on this matter so readily. We have not had a word of explanation from the Minister; he has simply said that he is prepared to accept the Clause.

Captain Hudson: This is a new type of vehicle, what is called a tradesman's handcart, mounted on a three-wheel chassis and propelled by an electrical motor. The driver walks behind. It is evident that a vehicle of this kind cannot make very great use of the road. It is always difficult when new vehicles are invented, to fit them into the taxation of the country, and we felt that to treat this vehicle the same as a motor tricyle, which uses the road to a much larger extent, was unfair and, when asked to consider a reduced tax, we were prepared to make it £2 instead of £4.

Mr. Alexander: Have you considered what is to be the weight of the vehicle when loaded?

Captain Hudson: It is a question how much it uses the road.

12.11 a.m.

Mr. Davidson: Can the hon. and gallant Gentleman give an indication as to the amount involved?

Captain Hudson: It is negligible.

Mr. Davidson: It is all very well to say that this type of vehicle does not use the road very much, but it is more of a menace on the road than any other type of motor, and it is being used generally by people who desire to save cost. It would be better if the Government encouraged the use of proper vehicles with a view to ensuring safety on the roads than encourage danger and cheaper methods of transit.

Clause added to the Bill.

NEW CLAUSE.—(Reduction of duty on tower wagons.)

(1) Vehicles to which this section applies, and which are chargeable with duty under sub-paragraph (c) of paragraph 5 of the Second Schedule to the Finance Act, 1920, shall be chargeable thereunder at the rates applicable to electrically-propelled vehicles, whether they are so propelled or not.

(2) The vehicles to which this section applies are goods vehicles—

(a) which are used for the purposes of an electricity undertaking, gas undertaking or electric transport undertaking, and for no other purpose; and


(b) into which there is built, as part of the vehicle, a telescopic contrivance designed for facilitating the erection, inspection, repair or maintenance of overhead structures or equipment; and
(c) which are neither constructed nor adapted for use nor used for the conveyance of any load except such a contrivance and articles used in connection therewith.

(3) In this section the expression "electricity undertaking" means an undertaking for supplying electricity or for supplying light by means of electricity, the expression "gas undertaking" means an undertaking for supplying gas or for supplying light by means of gas, and the expression "electric transport undertaking" means an undertaking for supplying transport by means of electrically propelled vehicles.

(4) This section shall come into operation on the first day of January, nineteen hundred and thirty-eight.—[Mr. H. G. Williams.]

Brought up, and read the First time.

12.17 a.m.

Mr. H. G. Williams: I beg to move, "That the Clause be read a Second time."
I raised this question last year, and it is one which affects all municipalities and companies which happen to own trams. As hon. Members are aware, curious looking vehicles, which in these days are propelled mechanically, are used in connection with the repair of the overhead wires of the tramways. Obviously, the total road user of this vehicle is trifling, and the underlying principle of the horsepower tax is one of weight. Whatever tax is applied on goods or road vehicles it is, roughly speaking, a question of how much damage they are likely to do to the road. These vehicles do very little damage to the road, because their actual amount of travelling is comparatively small. Tramway undertakings, whether municipal or company, are liable to have

to pay very substantial amounts, because the towers which are used for the repair of the overhead equipment are technically motor cars, and the proposal is that these vehicles should be treated in future differently from the way they are treated at present, and that the duty should be reduced. The argument is clear and is one that is understood by hon. Members, and therefore, I need not speak at greater length.

12.18 a.m.

Captain Hudson: I ask the Committee again to accept this new Clause. As my hon. Friend the Member for South Croydon (Mr. H. G. Williams) has said, he raised this question on the Finance Bill at this time last year, and I then said that I would consult the Treasury and see whether we could meet the point. As it is, owing to the weight of these vehicles, they are now charged at the heaviest duty of petrol-driven vehicles, which is about £50, and it is proposed under the new Clause that they should be charged at the lowest duty, which is £35. As my hon. Friend has said, their annual mileage is very small. They are very useful vehicles, and I think that it is a concession which the Committee may be prepared to make.

Mr. Alexander: Mr. Alexander rose—

The Chairman: I must enforce the ordinary rule. I have collected the voices.

Mr. Alexander: The voices had not been collected.

Motion made, and Question put, "That the Clause be added to the Bill."

The Committee divided: Ayes, 126; Noes, 21.

Division No. 256.]
AYES
[12.19 a.m.


Acland-Troyte, Lt.-Col. G. J.
Butcher, H. W.
Elliston, Capt. G. S.


Agnew, Lieut.-Comdr. P. G.
Cary, R. A.
Elmley, Viscount


Albery, Sir Irving
Castlereagh, Viscount
Everard, W. L.


Anstruther-Gray, W. J.
Channon, H.
Foot, D. M.


Apsley, Lord
Clarke, Lt.-Col. R. S. (E. Grinstead)
Fremantle, Sir F. E.


Aske, Sir R. W.
Cobb, Captain E. C. (Preston)
Furness, S. N.


Astor, Hon. W. W. (Fulham, E.)
Colville, Lt.-Col. Rt. Hon. D. J.
Goldie, N. B.


Baillie, Sir A. W. M.
Conant, Captain R. J. E.
Grant-Ferris, R.


Baldwin-Webb, Col. J.
Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Grimston, R. V.


Balfour, Capt. H. H. (Isle of Thanet)
Cox, H. B. T.
Guest, Lieut.-Colonel H. (Drake)


Beauchamp, Sir B. C.
Craven-Ellis, W.
Guinness, T. L. E. B.


Beaumont, Hon. R. E. B. (Portsm'h)
Crookshank, Capt. H. F. C.
Gunston, Capt. D. W.


Bird, Sir R. B.
Dixon, Capt. Rt. Hon. H.
Guy, J. C. M.


Bossom, A. C.
Drewe, C.
Hannah, I. C.


Boyce, H. Leslie
Duckworth, W. R. (Moss Side)
Hannon, Sir P. J. H


Brass, Sir W.
Dugdale, Captain T. L.
Harlington, Marquess of


Briscoe, Capt. R. G.
Duggan, H. J.
Heilgers, Captain F F A.


Brocklebank, Sir Edmund
Duncan, J. A. L.
Hepburn, P. G. T. Buchan-


Bull, B. B.
Eckersley, P. T.
Herbert, Major J. A. (Monmouth)




Higgs, W. F.
Neven-Spence, Major B, H. H.
Smith, Bracewell (Dulwich)


Holdsworth, H.
Nicolson, Hon. H. G.
Southby, Commander Sir A. R. J.


Horsbrugh, Florence
Orr-Ewing, I. L.
Strauss, H. G. (Norwich)


Hudson, Capt. A. U. M. (Hack., N.)
Patrick, C. M.
Strickland, Captain W. F.


Keeling, E. H.
Peake, O.
Sueter, Rear-Admiral Sir M. F.


Kerr, J. Graham (Scottish Univs.)
Peat, C. U.
Sutcliffe, H.


Lamb, Sir J. Q.
Petherick, M.
Thomas, J. P. L.


Law, R. K. (Hull, S.W.)
Procter, Major H. A.
Tree, A. R. L. F.


Leckie, J. A.
Ramsay, Captain A. H. M.
Tufnell, Lieut.-Commander R. L.


Liddall, W. S.
Ramsbotham, H.
Turton, R. H.


Llewellin, Lieut.-Col. J. J.
Rankin, Sir R.
Wakefield, W. W.


Loftus, P. C.
Rayner, Major R. H.
Walker-Smith, Sir J.


Mabane, W. (Huddersfield)
Reed, A. C. (Exeter)
Wallace, Capt. Rt. Hon. Euan


MacAndrew, Colonel Sir C. G.
Reid, W. Allan (Derby)
Ward, Irene M. B. (Wallsend)


McCorquodale, M. S.
Rickards, G. W. (Skipton)
Waterhouse, Captain C.


MacDonald, Rt. Hon. M. (Ross)
Ropner, Colonel L.
Wickham, Lt.-Col. E. T. R.


Macmillan, H. (Stockton-on-Tees)
Rowlands, G.
Williams, H. G. (Croydon, S.)


Margesson, Capt. Rt. Hon. H. D. R.
Russell, S. H. M. (Darwen)
Winterton, Rt. Hon. Earl


Mayhew, Lt.-Col. J.
Sanderson, Sir F. B.
Womersley, Sir W. J.


Mellor, Sir J. S. P. (Tamworth)
Savery, Sir Servington
Wright, Squadron-Leader J. A. C.


Mills, Major J. D. (New Forest)
Seely, Sir H. M.
Young, A. S. L. (Partick)


Morrison, G. A. (Scottish Univ's.)
Selley, H. R.



Muirhead, Lt.-Col. A. J.
Shaw, Major P. S. (Wavertree)
TELLERS FOR THE AYES.—


Munro, P.
Simon, Rt. Hon. Sir J. A.
Mr. James Stuart and Mr. Cross.




NOES.


Alexander, Rt. Hon. A. V. (H'lsbr.)
Kirby, B. V.
Smith, E. (Stoke)


Benn, Rt. Hon. W. W.
Maxton, J.
Stephen, C.


Buchanan, G.
Pethick-Lawrence, Rt. Hon. F. W.
Tinker, J. J.


Davies, S. O. (Merthyr)
Price, M. P.
Windsor, W. (Hull, C.)


Garro Jones, G. M.
Pritt, D. N.
Woods, G. S. (Finsbury)


Greenwood, Rt. Hon. A.
Robinson, W. A. (St. Helens)



Grenfell D. R.
Silkin, L.
TELLERS FOR THE NOES.—


Kelly, W. T.
Smith, Ben (Rotherhithe)
Mr. Mathers and Mr. Davidson.


Question put, "That the Clause be read 'a Second time," put, and agreed to.

Ordered, "That the Chairman do report Progress; and ask leave to sit again."—[Captain Margesson.]

Committee report Progress; to sit again upon Monday next.

Orders of the Day — EXCHANGE EQUALISATION ACCOUNT BILL.

Considered in Committee.

[Captain BOURNE in the Chair.]

Clauses 1 and 2 agreed to.

Bill reported, without Amendment; to be read the Third time To-morrow.

The remaining Orders were read, and postponed.

It being after Half-past Eleven of the Clock upon Thursday evening, Mr.

DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned at Twenty-nine Minutes before One o'Clock.